[Provisional translation]

CABINET PUBLIC AFFAIRS SECRETARY: We will now begin the New Year's press conference by Prime Minister Shinzo Abe.
We will begin with a statement from the Prime Minister.

Mr. Prime Minister, your opening statement please.

Opening Statement by Prime Minister Shinzo Abe

PRIME MINISTER ABE: A Happy New Year to all of you.

I think that during the year-end and New Year's holidays, many people had the opportunity to enjoy with their families a leisurely nine days off in a row through a stroke of good luck on the calendar.

Tomorrow I will hold a summit meeting with Prime Minister Erdogan of Turkey, who will be visiting Japan. Already from this upcoming, Thursday I am scheduled to head off to Africa and the Middle East, on my first overseas visit of the new year. I intend to get the new year underway with renewed spirits and a sense of urgency as I make a fresh start.

Last year, typhoons, torrential rains, tornadoes and other natural disasters occurred one after another and I believe that some people faced great difficulties due to the tremendous damage as they welcomed the new year.

More than 270,000 victims of the Great East Japan Earthquake also rang in the new year at evacuation sites. I have visited the Tohoku disaster area once each month over the past year. Since about summertime, reconstruction has been moving forward in ways that have gradually become perceptible, including verdant farmland, fishing ports overflowing with vibrancy, and public housing for disaster victims now open for occupancy. This year I will once again devote my utmost efforts to accelerating reconstruction still further, notably in the rebuilding of residences at the earliest possible time.

In November last year a typhoon also wreaked enormous damage in the Philippines. A medical team from Japan and some 1,200 members of our Self-Defense Forces (SDF) provided emergency assistance. During the recent winter holiday period, far away, in the Middle East and Africa, members of the SDF and the Japan Coast Guard were engaged in U.N. peacekeeping operations to assist the people of South Sudan and were protecting the world's marine vessels from pirates in one of the major maritime arteries, without taking a break even for the New Year. I would like to express my appreciation to them as they carry out their duties with a high degree of morale, even in that severe environment where temperatures can reach as high as 50oC.

Again this year Japan, acting in coordination with the international community, will play an even more proactive role for world peace and stability than in the past. We must build an age which is free from the sufferings caused by the devastation of war. I believe Japan must be a country which joins hands with friends in Asia and friends around the world to realize the peace of the entire world. As we begin this new year, I have renewed my determination in this regard.

Earlier today, I visited Ise Jingu shrine, having also visited in October to attend the Sengyo no Gi ceremony. As I encountered the dignified atmosphere of the shrine precincts, I once again had a very sobering feeling.

The Japanese economy has broken away from the critical situation of a year ago and is now walking steadily along a recovery track. Standing on the pitcher's mound with the bases loaded and no outs, I have thrown with all my might the pitches that I have faith in. Through my "three arrows" of economic revival, I have transformed the Japanese economy from negative growth to positive growth. The ratio of job offers to job seekers has recovered to 1.0 for the first time in six years. While there are unemployed people now looking for work, their numbers are now matched by the number of available jobs and job offers. Business confidence among small- and medium-sized enterprises is also now changing for the better. At the end of 2013, business sentiment turned positive among manufacturers for the first time in six years, while for non-manufacturers it turned positive for the first time in an astounding 21 years and 10 months.

While some continue to face very trying situations, the range of economic recovery has steadily expanded over the past year. I managed to successfully overcome a "top half of the first inning, bases-loaded, no-out" crisis.

This year, switching from offense to defense in the bottom half of the first inning, my role will be to work aggressively to triumph in breaking free from deflation.

This spring I want to convey a tangible feeling of economic recovery to the public in the form of higher incomes.

That will lead to further economic recovery through expanded consumption. This year I intend to spread this virtuous cycle to everywhere throughout the nation.

The ordinary Diet session will convene this month. This session will take up the 5.5 trillion yen supplementary budget for fiscal 2013 and the fiscal 2014 budget, as well as tax reforms, including an expansion of tax measures to support companies that increase employees' salaries.

What we are aiming for is the realization of an economic virtuous cycle and increases in people's incomes. This year's ordinary Diet session will be "the Diet to bring about an economic virtuous cycle."

This year is the "year of the horse" in the Chinese zodiac. I understand that horses have a 350-degree field of vision and are able to see essentially everything except what is directly behind them. Having been born in the year of the horse myself, I intend to make this year another year in which I carry out political administration with a wide field of vision, like that of a horse.

At the same time, horses are said to be easily frightened because of this ability to see in all directions.

Japan too lost confidence in itself as a result of deflation that has lasted close to 20 years. One taps his way across a stone bridge to be sure. However, if you are too cautious, you demolish a stone bridge by striking it. In the same way, Japan has at times had worry take the lead and has avoided taking on challenges. But in fact, "you can do it if you try." The world is once again taking notice of Japan. It has even been decided that Tokyo will host the 2020 Olympic and Paralympic Games. When we all give our best, our dreams come true. As the saying goes, "To really know a horse, you must first try riding it; to really know a person, you must first get well acquainted." Rather than be worried about things before they happen, I consider it important to have the attitude of first trying things and taking on challenges.

The Sochi Olympics and Paralympics will take place this February, and the FIFA World Cup for soccer will be held in June. Japan's athletes are sure to have an outstanding showing on the world stage. Just thinking about it is exhilarating. I hope to make this a year in which all the Japanese people are able to look forward excitedly, with each of us able to step out into new challenges in the belief that "if I work hard, the New Year a year from now will surely be even better than this year."

It is my sincere hope that this year is a magnificent year for all the Japanese people.

I will end my opening statement here.

Q&As

CABINET PUBLIC AFFAIRS SECRETARY: We will now open the floor to questions from the press.

When you are called on, please first state your name and affiliation before asking your question.

I would like to begin with a representative of the Cabinet Press Club. Anyone?

Yes, please go ahead.

REPORTER (SHIBUYA, TV TOKYO): I am Shibuya with TV Tokyo. Thank you for taking my question.

Last year, monetary easing and a mobilization of fiscal spending under Abenomics stimulated stock prices and the exchange rate, and economic indicators improved dramatically.

At the same time, however, the breaking free of deflation that you have been working towards has not been fully accomplished. In addition, a reaction caused by the increase in the consumption tax rate is anticipated from April. Against this backdrop, you have said that you would again make the economy your topmost priority this year. In concrete terms, when and in what form do you intend to work out a new policy? Also, in the negotiations on the Trans-Pacific Partnership (TPP) Agreement, which you noted as last year's major political decision and counted as one part of the Growth Strategy, Japan is still unable to find points of compromise with the United States. In working to conclude the TPP negotiations, do you view it as absolutely essential to maintain tariffs on the 586 items within the five sensitive product categories? Without the premise that all are essential, do you consider it acceptable for the conclusion of the negotiations to be delayed even further?

PRIME MINISTER ABE: I, and the Abe administration, believe that it is incumbent upon us to fulfill our responsibility of properly maintaining Japan's world-class social security system, including its pension, medical care, and nursing care systems, and handing it down to the next generation. To achieve that, we will raise the consumption tax rate from 5 per cent to 8 per cent, in order to respond to rising social security expenses and furthermore expand support for child-rearing. This will at the same time also lead to maintaining public trust.

However, at the same time, we now have seized the opportunity perhaps to break free from deflation, at long last after 15 years. We must not allow this opportunity to be lost. Therefore, we will undertake 5.5 trillion yen of economic measures and 1 trillion yen of tax measures in response to the increase in the consumption tax rate from this April. I also believe that there is no other way forward but to achieve economic growth, a breakaway from deflation, and fiscal reconstruction all concurrently.

In addition, it is imperative that we link improved corporate earnings to increases in wages and to capital investment. In order to bring this about, from fiscal 2014, we will lower the effective corporate tax rate by 2.4 per cent. We have decided to establish bold investment tax credits as a taxation measure at a scale of 1 trillion yen and to expand tax cuts drastically for companies that raise their workers' wages. At the end of 2013, the government, management, and labor succeeded in reaching a common understanding that it is necessary to expand corporate earnings and then link those to wage increases, and that all three sides would work in concert to achieve that. I intend for us to make efforts that will translate that into practice.

We will also transition squarely into execution of the Industrial Competitiveness Enhancement Act, the Act on National Strategic Special Zones, and other legislation passed during the recent Diet session. This month, I intend for us to formulate the implementation plan for the policies and measures that we will be executing in the months to come, as well as clarify the implementation periods and the minister in charge of each area. I also expect for us to clarify the principles for examining various areas in the future, centered on employment, human resources, agriculture, medical treatment, nursing care, and so on, aiming to revise the Growth Strategy in the middle of this year, in order to press forward with further structural reforms.

As for the TPP Agreement, the TPP is a framework that promises to bring about future prosperity for Asia and the Pacific. I consider it to be truly a provident masterstroke for the nation. With regard to what are called the "five sensitive product categories" within agricultural products, we are engaged in negotiations under the principle of pressing forward assertively in areas where we should, while also protecting what must be protected, conscientiously taking to heart the resolutions passed by the Agriculture, Forestry, and Fisheries Committees of both the Upper and Lower Houses of the Diet.

Negotiations on the TPP Agreement will essentially forge win-win relationships. However, in localized terms, national interests clash with each other. I intend to channel wisdom in taking a comprehensive decision regarding how to find our final landing site within this context of competing national interests.

CABINET PUBLIC AFFAIRS SECRETARY: Next, I will take a question from a correspondent representing the local Correspondents' Club for the Mie Prefectural Government. Please go ahead.

REPORTER (MATSUMOTO, CBC): I am Matsumoto of CBC, the coordinator of the Correspondents' Club for the Mie Prefectural Government. Thank you for taking my question.

I wish to ask about your approach to nuclear power plants. Please discuss your views regarding whether or not you will push forward with constructing new nuclear power plants in the future, including the plan to construct a nuclear power station in Ashihama in Mie Prefecture, for which Chubu Electric Power Co. (CEPCO) announced it has abandoned its plan.

PRIME MINISTER ABE: Our basic policy is to reduce our degree of reliance on nuclear power to the greatest extent possible while diversifying our energy resources through the use of renewable energies, high-efficiency LNG, and coal and also promoting thoroughgoing energy conservation.

New safety standards at the highest level anywhere in the world have been formulated by the independent Nuclear Regulation Authority. First of all, decisions will be made on restarting nuclear reactors that surpass these strict new safety standards. At present, I do not envisage at all the construction of any new nuclear reactors. My thinking at this time is as I just stated-to concentrate first of all on diversifying our energy sources and making decisions on restarting existing reactors.

CABINET PUBLIC AFFAIRS SECRETARY: Now I will take another question from a representative of the Cabinet Press Club. Yes, go right ahead.

REPORTER (KOKETSU, JIJI PRESS): Happy New Year. I am Koketsu with Jiji Press.

I would like to ask about diplomacy and the Constitution.

Mr. Prime Minister, last year you visited Yasukuni Shrine and you have stated that you would like to explain your position to China and the Republic of Korea (ROK) directly. However, thus far, you have not had a concrete approach in calling for dialogue. With regard to this matter, today President Park Geun-hye of the ROK also called for compromises towards Japan, stating that sufficient preparations should be made for a Japan-ROK summit meeting to take place. Approximately what timing will you aim for regarding meetings with China and the ROK this year, and what sort of approach do you plan to take to bring such meetings about?

There has also been some reaction from China and the ROK regarding the diplomatic and security policies you are advancing. In addition, insofar as diplomacy with these two countries will also be closely intertwined with amending or revising the interpretation of the Constitution, how do you intend to move forward with such revisions?

PRIME MINISTER ABE: I consider forging dialogues with China and the ROK to be crucially important for the peace and stability of this region. While there are no prospects for a summit meeting with either country at the present time, I believe that it is precisely because we face challenging issues or problems that the leaders of our countries should have frank discussions without any preconditions attached.

Regarding my visit to Yasukuni Shrine as well, I would like to explain directly and in good faith my true intentions, as expressed in the Statement I released on the matter.

Additionally, although your question just now indicated that at present I am not taking a direct approach calling for dialogue, for me, the door for dialogue is always open. I have been stating in public fora such as this that I wish wholeheartedly to hold Japan-China and Japan-ROK summit meetings. This is precisely what I consider a direct approach and I would like by all means for us to engage in frank discussions at the leaders' level without any preconditions attached. I would like very much for China and the ROK to embrace the same stance.

Moreover, with regard to the issues related to the Constitution, it is already going to be 68 years since the Constitution was enacted. We should now deepen our national discussions further with a view to changing or revising its interpretation, based on changes in the times. I would like to explain the matter carefully to other nations, including China and the ROK. Through this and through also thoroughly explaining Japan's "Proactive Contribution to Peace" that the Abe administration is now advocating, I am confident that we will certainly succeed in gaining the understanding of other nations.

CABINET PUBLIC AFFAIRS SECRETARY: I'm afraid that we are nearing the end of our scheduled time, so I would like to make the next question the final question for today.

I would like to take another question from a correspondent representing the local Correspondents' Club for the Mie Prefectural Government.

REPORTER (MATSUMOTO, CBC): I am Matsumoto of CBC, the coordinator of the Correspondents' Club.

I would like to ask about one more point, specifically the Chuo Maglev Shinkansen. The people of Mie Prefecture are looking forward to economic effects from this bullet train line and are therefore calling for the line to open in its entirety at the same time, rather than for it to open in two stages, beginning with the Shinagawa to Nagoya portion. What are your thoughts on this?

PRIME MINISTER ABE: The Chuo Maglev Shinkansen utilizes world-class railway technology that is the most advanced anywhere in the world. As such, I consider it a dream-inspiring project. I think that advancing this kind of project will make the Japanese people look forward in anticipation.

In the future when the Chuo Maglev Shinkansen comes into operation, people will be able to get from Tokyo to Osaka in the remarkably short time of only a little over an hour, and it will also become easier to get to Mie Prefecture. It will be possible also to pay a quick visit to Ise Jingu from Tokyo, so I believe it will bring major effects to Mie Prefecture as well.

JR Central is serving as the main entity constructing the line and I am certain that they have been considering various ways to proceed with the construction. As I stated earlier, it is fair to call the maglev bullet train one type of national project. The national government would like to do what it can to provide support in various forms.

CABINET PUBLIC AFFAIRS SECRETARY: We have now reached the end of our scheduled time. With that, I would like to bring Prime Minister Shinzo Abe's new year's press conference to a close.

Thank you all very much for your cooperation.

PRIME MINISTER ABE: Thank you very much.