Economic Revitalization Minister
Economic Revitalization Minister
Investors around the world have been watching closely to see if Prime Minister Shinzo Abe can live up to his promise to "bring Japan back."
The man largely responsible for jumpstarting the economy... and fulfilling that promise is Akira Amari, the Economic Revitalization Minister.
Amari is juggling a number of challenges, including economic reforms and negotiations to reach a free trade pact with Asia-Pacific nations.
A renowned business magazine has chosen him as one of the world's 50 most influential leaders.
NHK WORLD's Ai Uchida hosted an exclusive interview with Minister Amari in our Shibuya studio.
Well, if you raise the consumption tax, people will want to go on a buying spree before the tax hike. And the higher the tax goes up, the bigger the last-minute demand. And of course people have bought what they want, so in the quarter following the tax hike, you would see a drop in spending.
But what's important is that - you have to look at the average if you want to see the true economic trend. So from January to March, and then from April to June, when you see this big jump and then a dip, you have to look at the average. Then we'll see that you have this growing trend. So I don't think you have to worry too much. The important thing is what happens from July to September. Is it going to be a strong recovery or not? Analysts say that we might see a 4 percent or so growth in the same period. The government hasn't released its official projection yet. But we do believe we will see a good recovery.
The government will decide by the end of the year if it will increase the consumption tax from 8 percent to 10 percent. How much growth is needed to go on with the tax hike?
We don't have any specific figures to decide yet. In the end, the Prime Minister will look at the numbers for the July to September period, and also look at the monthly data, to make the final decision. Of course, that will include the job market situation, and other economic indicators. The main thing we'll be looking for is whether the economic recovery trend continues or not. And if we can see steady growth which allows us to raise the consumption tax to 10-percent as scheduled, that would be the best scenario. But if we raise the consumption tax and the economy slumps, that of course, would be hazardous. We have to weigh the impact of a tax hike, and how big that impact would be. We will have to compile all these things together for the Prime Minister to make the final decision by the end of the year.
If the tax is increased to 10 percent, that means the consumption tax rate will have doubled in just 18 months. Wouldn't this trigger an economic downturn?
Raising the consumption tax would of course have certain risks, but at the same time, it would become a steady revenue source...meaning that from the viewpoint of fiscal consolidation and the social security aspect, it's positive. We need to balance out the positive and negative aspects. We have to make sure that we make the positive effect bigger. If we decide not to raise the tax, it means we will need another plan to rebuild our fiscal health. We should consider how to maintain investor confidence in Japanese bonds. If we are not to make a decision by the end of this year, then, we must clearly show a plan for when we should raise the tax. The best scenario, of course, is that we see the nation's economy recover steadily and raise the tax again as scheduled, and make sure Japan's economy overcomes that second consumption tax hike. We will have to make sure we keep an eye on all indicators so this can actually happen.
One of the pillars of the economic growth strategy compiled by the administration in June is cutting corporate tax. Japan's corporate tax rate is about 35 percent and is said to be the second highest among developed countries, exceeded only by the US. Many investors have been upbeat about the announcement, but can they expect about a 2 percent cut in the initial year, which is fiscal 2015?
We've decided that we will take several years to lower corporate tax to less than 30 percent, so it means we will be reducing it by 6 percentage points. We are considering doing this over a 5 year-span. If the economy turns out better than we expect, we may bring that forward...but if the economy does not improve, it may take a bit more time. Now, at what pace can we reduce the tax? That will depend on how well the economy recovers. We will be discussing this issue toward the end of the year.
But you would like to take a bold step in the first year, am I right?
The most important point is to hit the target within a 5-year time span. I believe it's important that the government commits to this plan. The Prime Minister has said the government will cut its corporate tax rate so that it reaches the global standard. And we will try hard to realize our plan as scheduled.
Let me ask you about the TPP. The Abe administration has been emphasizing the importance of being a part of the trade talks among 12 Asia-Pacific nations. If all members come to an agreement, a huge free trade zone will emerge, which will account for 40 percent of the world's GDP. However, even some members of the participating nations say they cannot conclude the deal by the end of the year. What is the biggest obstacle?
The important thing is that Japan and the US, which account for 80 percent of the GDP of these 12 member countries, reach a basic agreement. It's also important that we make sure that something that has once been decided is not reopened again.
If we reopen discussions on what has already been agreed upon, this will totally upset the confidence and trust we've achieved over whatever has been agreed upon.
Stakeholders within each country would of course like to see a 100 percent satisfactory deal for their own country. But what's good for one country may not be good for another. So even if the stakeholders pressure their government leaders that they are not satisfied with the agreed deal, those leaders should not ask other countries to repeal the deal and make additional concessions. Top officials of the TPP member nations should abide by bilateral or multilateral agreements that have been reached and not reopen discussions on the accords. The leaders should rather commit themselves to persuade all the stakeholders in their respective nations to accept the agreements.
Whether the US and other members can keep up their commitment to the TPP will be the key to reaching a broad agreement within this year. Every member needs a strong resolve and should make efforts to persuade stakeholders and legislative bodies to accept the agreements.
There's no doubt that the US holds the key to moving the free trade talks forward. Do you think the negotiations will progress smoothly after the coming midterm election?
We are looking at how the midterm election will impact the deal. Yes, the people whose interests are at stake in this election will be listening more to their domestic constituents, meaning they will want to see a more satisfactory deal for their people.
But if you just insist on what you want to all the other countries, we will have no deal. We have to persuade the stakeholders that the agreement is going to have a positive impact for all the countries involved. Once the US midterm election is over, it will no longer be a factor to destabilize negotiations. Whatever the results of the election, we should see things settle down somewhat. We're hoping we will then see negotiations move forward much faster.