Press Conference by the Deputy Chief Cabinet Secretary (Excerpt)

Q&As
・The GDP growth for the July to September quarter
・The issue regarding the events of the 2018 Pyeonchang Winter Olympic

REPORTER: The revised figures for GDP growth for the July to September quarter were released today. They were revised downwards from the preliminary figures released last month to a real growth rate of minus 1.9 percent on an annualized basis. Can I ask for your thoughts on these figures?

DEPUTY CHIEF CABINET SECRETARY SEKO: The quarterly estimate has been released and it shows that the real GDP growth rate for the July to September quarter of 2014 was minus 1.9 percent over the previous year. This is the second consecutive quarter of negative growth. There was a last minute surge in demand prior to these two quarters of negative growth, and the downturn is a reaction to that surge. Looking at the average for the entire January to September period shows that the growth rate is still above that of the previous year.

In terms of the factors for the negative growth rate, firstly a downturn in inventory investment can be cited. In addition, with regard to private consumption, although the figures are above what they were in the same period of the previous year, the rate of increase remains small in the wake of the large drop in the previous quarter. It is assumed that this is due to such factors as a downturn in consumer sentiment and the impact of the irregular weather patterns during the summer months.

On the other hand nominal worker compensation has risen by 2.4 percent over the same period of the previous year, the highest rate of growth for 17 years.

Furthermore, public investment has increased, thanks to the effect of the early implementation of the FY2013 supplementary budget and the FY2014 budget.

With regard to the current status of the economy, given that positive trends are continuing, including increases in workers’ compensation against a backdrop of high levels of corporate revenue, the Government’s recognition is that there is no change in the trend towards a moderate recovery. We will continue to pay close attention to developments in the economy.

REPORTER: What impact do you think the announcement of these figures will have on the Government’s policy of promoting Abenomics?

DEPUTY CHIEF CABINET SECRETARY SEKO: Abenomics is still a work in progress and as the Government is seeking to fully realize a positive economic cycle efforts are still ongoing. It is for this reason that Prime Minister Abe has decided to postpone the increase in the consumption tax rate to 10 percent for a period of 18 months, and to seek a popular mandate regarding whether Abenomics should be continued or not.

REPORTER: According to international economic definitions, two consecutive quarters of negative growth implies that a country is in recession. Is it the Government’s recognition that the trend toward recovery is continuing and there is no recession?

DEPUTY CHIEF CABINET SECRETARY SEKO: I believe that there is no change in the trend towards recovery.

REPORTER: I have a related question. You did not mention capital investment in your previous comments, the growth rate for which has also been revised downwards in the latest figures. I believe that capital investment was an item that was expected to increase as part of the early trickle-down effects of the positive economic cycle of Abenomics, following improvements in corporate revenue. What are your thoughts as to why this effect has yet to appear?

DEPUTY CHIEF CABINET SECRETARY SEKO: Private sector capital investment has been revised downwards from the first preliminary quarterly estimate, and it is my understanding that this downward revision reflects corporate statistics that have also been released.
Nevertheless, for the realization of a positive economic cycle it is of course very important for capital investment to increase and the Government will continue to monitor the situation. Looking at various data there are some signs that capital investment is also heading in a positive direction. For example, figures show that orders for machinery have increased. The Government will continue to monitor the situation and work hard to ensure that corporations feel able to increase their capital investment.

REPORTER: Opposition parties have indicated the new downwardly revised figures as evidence that Abenomics is not working and that it has failed. What is your view?

DEPUTY CHIEF CABINET SECRETARY SEKO: As I have already noted, only two years have passed since Abenomics was initiated, but during that time a number of significant outcomes have been achieved. For example, nominal work compensation growth is at its highest level for 17 years, corporate revenues are at extremely high levels, and share prices also remain buoyant, rising upwards today too. However, we have not yet reached the point where a positive economic cycle has been achieved. Although wages have increased, consumption has yet to follow. Should Abenomics be stopped in mid-course or should it be continued? That is precisely the question we are asking the public in the election.

REPORTER: I have a related question. At the time that the consumption tax rate was raised it was suggested that any impact on the economy could be ameliorated through economic policies. However, the second preliminary figures have further downgraded the growth rate from minus 1.7 to minus 1.9 percent. On what points do you think the Government was mistaken in its outlook?

DEPUTY CHIEF CABINET SECRETARY SEKO: My understanding is that cooling of consumption is a reaction to the surge in demand prior to the rise in the consumption tax rate. Although the view was that the economy would recover from such a reaction, the fact is that the pace of recovery is taking longer than anticipated.
Various factors have been cited for the prolonged cooling in consumption, including the irregular weather patterns of the summer months, but the fact remains that a rebound in consumption is taking longer than initially anticipated. It was for this reason that Prime Minister Abe decided to postpone the raising of the consumption tax rate to 10 percent.

(Abridged)

REPORTER: There are some press reports that suggest that consideration is being given to holding some of the events of the 2018 Pyeongchang Winter Olympics, such as sliding events, in Japan. Could you tell us your thoughts concerning the possibility of some events being held in Japan?

DEPUTY CHIEF CABINET SECRETARY SEKO: I am aware of the press reports that the International Olympic Committee is considering holding some of the events of the 2018 Pyeongchang Winter Olympic and Paralympic Games outside of the Republic of Korea (ROK). However, nothing has been decided about this matter in an IOC Session, and there are also reports that the Pyeongchang Organizing Committee has announced that it is not engaged in such considerations. The Japanese Olympic Committee has not heard anything about this matter and therefore I would like to refrain from making any comment on behalf of the Government.