Press Conference by the Chief Cabinet Secretary (Excerpt)

Q&As

• The issue of consumption tax rate
• The issue regarding the exchange rate

REPORTER: Diet member Fukushiro Nukaga and Chairman Takeshi Noda of the Liberal Democratic Party (LDP) Research Commission on the Tax System recently came to the Prime Minister’s Office to discuss matters relating to a reduced tax rate. Yesterday it was agreed in the consultative meeting of the ruling parties on the tax system to introduce such a reduction in April 2017, and to include this reduction in both parties’ campaign pledges. Can I ask for the Government’s thoughts on this matter?

CHIEF CABINET SECRETARY SUGA: With regard to a reduced tax rate following the increase in the consumption tax rate, the Prime Minister himself stated in his press conference on November 18 that there are tax experts within the ruling parties who will thoroughly examine this issue. Therefore, I believe that such consultations between the ruling parties are in their final stages.

REPORTER: I have a related question. There are some people who are of the opinion that postponing a further rise in the consumption tax rate, and the introduction of a reduced tax rate would make the primary balance target for 2020 extremely difficult to achieve. What are your views on this point?

CHIEF CABINET SECRETARY SUGA: I do not believe that will be a problem at all.

REPORTER: On what basis are you saying it will not be a problem?

CHIEF CABINET SECRETARY SUGA: It is precisely through Abenomics that the economy is growing. It is with economic growth in mind that the Prime Minister decided to postpone the increase in the consumption tax rate by 18 months, noting that during this time the Government will work to create a society in which there is a positive economic cycle in the private sector. Through a positive economic growth cycle it can naturally be expected that tax revenues will increase. Furthermore, the Prime Minister has clearly stated that the Government will work to fulfil its pledge by 2020, removing the means to backtrack on consumption tax increases. In this way, the Government will work to implement thorough economic management.

REPORTER: I have a related question. It has been pointed out by some that even if there is economic growth of two to three percent during this time, there would still be a shortfall of approximately 10 trillion yen. What are your thoughts on this point?

CHIEF CABINET SECRETARY SUGA: I do not know on what basis such comments have been made. The Government works meticulously and systematically to compile the budget each year, and will continue to take responsibility for budget compilation.

REPORTER: I have a further related question about the primary balance. Yesterday, you stated that the Government would make maximum efforts to halve the deficit by 2015. There are some who suggest that even with the consumption tax rate increase being postponed, according to preliminary calculations, the halving of the deficit could still be achieved. Is it the Government’s view at this stage that it would be difficult to achieve?

CHIEF CABINET SECRETARY SUGA: The Government’s stance is not to talk about things that are uncertain. However, the Government will make maximum efforts to achieve a halving of the deficit. Until now, this goal had been calculated by factoring in the anticipated additional two percent increase in the consumption tax rate, but it is also a fact that tax revenues have increased at a higher rate than expected as the economy continues to improve. In particular, the Government is also seeking to implement the new system for child-rearing as scheduled from April next year. It was with various factors in mind that I stated that the Government will make maximum efforts to achieve its target.

REPORTER: Today’s exchange rate has seen the yen depreciate to 118 yen to the dollar. Can I ask for your thoughts on the exchange rate?

CHIEF CABINET SECRETARY SUGA: As is always the case, I would like to refrain from making any comment about the exchange rate level and the background factors to the exchange rate. In any event, the Government seeks to continue pressing forward with measures to revitalize the Japanese economy, engaging in appropriate administrative and policy management to strengthen growth potential and exit deflation.

REPORTER: Do you have any thoughts about the background to the exchange rate level?

CHIEF CABINET SECRETARY SUGA: As I just stated, I would like to refrain from making any comment about the background factors to the exchange rate level.

REPORTER: I have a related question. When aiming to realize growth, there are both advantages and disadvantages to a weak yen. Increases in fuel prices are one of the disadvantages of a weak yen, so how will the Government respond to such situations?

CHIEF CABINET SECRETARY SUGA: As you just mentioned, it is indeed a fact that there are advantages and disadvantages in this situation. Therefore, I believe that it is of the utmost importance to continue to monitor trends in the exchange rate. However, crude oil prices have been falling for the past five months and they are currently around US$75, a 30 percent decrease from peak prices. Therefore, it is important for the Government to continue monitoring such trends, and implement response policies that will ensure that there is minimum impact on the daily lives of the people.

REPORTER: On a related note, in the previous election for the House of Representatives, the LDP pledged to correct the strong yen and exit deflation. While it is true that the strong yen has been corrected, as the yen continues its precipitous depreciation is the Government not concerned that it has now depreciated too far?

CHIEF CABINET SECRETARY SUGA: I would like to refrain from commenting about exchange rate levels. However, it was one of our campaign pledges to overcome the excessively strong yen. In actual fact, share prices, which were also mentioned in our campaign pledges, have now doubled in value. I believe that this demonstrates that our policies are starting to filter through the economy.