"The World and Japan" Database (Project Leader: TANAKA Akihiko)
Database of Japanese Politics and International Relations
National Graduate Institute for Policy Studies (GRIPS); Institute for Advanced Studies on Asia (IASA), The University of Tokyo

[Title] Press Conference by Prime Minster Kishida

[Date] March 28, 2024
[Source] Cabinet Public Affairs Office, Cabinet Secretariat
[Notes] Provisional translation
[Full text]

[Opening Statement]

Today, we enacted the budget for fiscal year 2024 as well as a bill revising the tax code. I thank all those involved for their cooperation.

We will go full throttle in implementing key measures, including our responses to the earthquake disaster. In order to facilitate flexible decision-making on how to utilize our reserve budget of one trillion yen within the fiscal 2024 budget, we will begin to assess the needs of the disaster-stricken area and push forward in setting up a reconstruction fund for the disaster area, based on the damage situation.

We have incorporated in the budget and the tax code revision that just passed a substantial number of policies geared towards income growth that outpaces rising prices. Today I will explain from a broader perspective the path forward for making that a reality.

Furthermore, we will work intently from now to amend the Political Funds Control Act. I will provide a thoroughgoing explanation of various issues surrounding politics and money during the question and answer time.

For roughly thirty years since I was first elected to the House of Representatives, I have been observing this deflationary economy with my own eyes. During that time, the mainstream argument has been that wages will climb as corporate productivity improves. However, the fact is that workers' wages remained stagnant even at the times when corporate earnings increased the most.

When I took the reins of government in October 2021, I advocated a New Form of Capitalism and decided it was my mission to bring about a virtuous cycle of growth and distribution and a virtuous cycle of wages and prices.

That is to say, first of all, wages rise. That results in more active consumption and higher corporate earnings. Productivity then improves as companies use those earnings to make investments for growth. A virtuous cycle is then realized when that precipitates a continual boost to wages. All of this enables a transition away from an economy oriented towards cost cutting to a growth-oriented new economic stage.

In order to achieve this, we must drive away the deflationary mindset that has become ingrained in us over so many years and shift in one burst the consciousness of society as a whole towards an orientation in which rising wages are regarded as a given. Consistent with this firm belief I hold, I have taken bold steps that will expand and enhance wage increases, capital investment, startups, and innovation all simultaneously, to help set in motion the virtuous cycle between income and growth. I have tenaciously called for new kinds of public-private cooperation that are in line with the times.

Currently, we find ourselves with a historic, once in a lifetime opportunity to fully break free from deflation. The trend of hefty wage hikes during the annual spring wage bargaining negotiations, which dramatically surpassed last year's spring wage increases, and the efforts underway by both labor and management to raise wages, are undergoing a major transformation. We now see capital investment at the highest level in history, an increasing number of companies taking highly assertive stances, and large-scale strategic investments from overseas being undertaken one after the other. Stock prices near their all-time highs, a market that highly values reforms, and individual investors embarking on New NISA (a tax exemption program for small investments) are the major players in this. Seeing the momentum resulting from such changes, some people are saying it is finally time to declare that we have fully exited deflation.

However, Japan is still only halfway down the path to full liberation from deflation. The responses we take from now will determine whether we are able to seize the opportunity to break free or we backslide, and whether or not we are able to hand down a prosperous Japan to the next generation. We are at a critical juncture that comes along only once every few decades. That is my fundamental understanding of the current state of the economy.

That is precisely why, in addition to the wage increases beginning this spring, I took the decision to reduce income and resident taxes by 40,000 yen in total per person from June, supporting people's disposable income. With the public and private sectors working in concert, we will with certainty create circumstances in which gains in disposable income surpass price increases and build up people's experiences in feeling this tangibly.

We will establish a forward-looking awareness in society as a whole that it is only natural for wages to rise. For setting the virtuous cycle of prices and wages in motion and transitioning to a new economic stage, the biggest key will be bolstering wage increases and earning capacity at small- and medium-sized enterprises (SMEs), where 70 percent of all employees work. We will make our utmost efforts to take comprehensive, multifaceted response measures.

The first is appropriately passing price increases through to clients. Within the supply chain, profits must be distributed appropriately not only to major corporations but also to SMEs. Towards that end, we will take every possible measure to ensure that labor costs are passed on appropriately.

First of all, we will deal strictly with violations of the Subcontract Act that impede wage increases. We have already issued official recommendations to eight companies regarding violations of the Subcontract Act since January alone. We will reinforce our implementation, including strengthening the operational standards of the Subcontract Act.

With regard to the Antimonopoly Act, in March, the Japan Fair Trade Commission took the unusual response measure of disclosing the company names of ten business operators making insufficient efforts. It has been reported to me that the Commission will continue by investigating whether or not the guidelines for passing labor costs through to clients have been adhered to thoroughly and then working to have those transactions improved.

Second, we will provide well-tailored support that smooths the way for wage increases. As part of our tax system to promote wage increases, from April, we will initiate unprecedented carry-forward tax deductions covering 80 percent of all SMEs that companies in the red can also utilize.

We have introduced a new system by which people working in medical and welfare settings, who account for 14 percent of all employed persons, are also certain to have wage increases come to fruition. In order to increase wages in the construction and distribution industries, we will dramatically raise the unit price of labor for various forms of labor. We have also submitted a bill to ensure that these are reflected in subcontracting and other areas within individual construction projects and a bill for substantial wage increases for truck drivers.

Third, we will strengthen our responses to the labor shortage at SMEs. We will intensively provide support to SMEs for labor-saving investments and investments in automation. We will also work to increase labor productivity through reskilling and endeavor to make a system that smoothly utilizes the skills and knowledge of the senior generation.

Fourth, we will provide support for working people. We have set a target of the minimum wage rising to 1,500 yen per hour by the mid-2030s, and we will do our utmost to be able to achieve that ahead of schedule. We will also address disincentives for second earners to earn more than a certain amount of income annually, known as the "annual income barrier," for part-time workers and non-regular employees. More than 200,000 people are already planning to make use of our new support system. We will continue to expand our support without budgetary constraints so that even more people are able to overcome the income barrier.

As support for families with small children, we will undertake measures that could not be realized until now despite having been pointed out for many years, including radically expanding child allowances, lessening the burden of higher education, expanding the child rearing allowance, and enhancing childcare leave benefits.

In order to revive Japan's earning capacity, including at SMEs, what will be important in the future is inexpensive and resilient energy. We must change the current situation, in which tens of trillions of yen are flowing overseas because of our energy imports. It is inevitable that we implement a national strategy in order to transition to an energy structure that ensures energy security, leads to decarbonization, and bolsters our domestic earning capacity. From now, we will engage in intensive discussions with a view to revising the Basic Energy Policy with a target of sometime within fiscal 2024.

Moreover, our Green Transformation (GX) National Strategy, which will serve as the backing to that revised Basic Energy Policy, will be fleshed out as a blueprint that further develops the GX Promotion Strategy released last year.

Last week, the Bank of Japan changed course on monetary policy for the first time in 17 years. As for the monetary easing policy of a "different dimension" that has been underway for over a decade, from the perspective of stepping towards a new stage while simultaneously further ensuring forward-looking economic developments, I view as appropriate the fact that an accommodative monetary environment will be maintained. The Government and the Bank of Japan will maintain close cooperation as we enter the most critical juncture for extricating Japan completely from deflation.

In closing, I wish to clearly state two pledges to the public for overcoming soaring commodity prices. First, this year we will reliably bring about incomes that surpass the rise in prices. Then, beginning next year, we will be certain to get wage hikes that outpace price increases firmly set in place.