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Interview: Kishida lauds Indo-Pacific framework as sign of U.S. commitment

By NAOYA YOSHINO, Nikkei political editor


TOKYO — Japan views the U.S.’s planned Indo-Pacific Economic Framework as a signal of America’s commitment and will work closely with Washington to “build a desirable economic order” for the region, Japanese Prime Minister Fumio Kishida told Nikkei on Friday ahead of his summit with U.S. President Joe Biden.


Edited excerpts from the interview follow.


Q: How will Japan engage with the IPEF?


A: We welcome it as a clear signal of U.S. commitment to the region. Japan is positively considering participating in it.


Q: What is your view on Washington’s absence from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership?


A: Our stance that we would prefer the U.S. to rejoin the TPP remains unchanged. Along with urging a return to the TPP, we will promote cooperation through the IPEF. Japan and the U.S. will work together closely to build a desirable economic order for the region, one that includes the U.S.


Q: Tokyo and Washington have been talking about partnering in next-generation semiconductors.


A: I hope we can have a good discussion on next-generation semiconductors at the summit. They’re a vital technology for implementing new digital technologies in society, such as quantum computing and artificial intelligence.


Japan has advantages in semiconductor materials and manufacturing equipment, and the U.S. has the capability to design advanced chips. As allies, it’s vital for us to come together and leverage each other’s strengths. This will be incorporated into the “new capitalism” action plan and put into action quickly.


Q: What are your views on the yen’s continued weakness against the dollar?


A: I can’t comment on that in my position. Rapid price changes are undesirable from anyone’s point of view. It’s important for us to maintain close communications with the currency authorities of other countries.


The lives of people and operations of businesses are impacted by elevated prices of crude oil and other commodities amid the weak yen. It’s crucial to implement our recently compiled 13 trillion yen [$101 billion] package of emergency measures and get it in people’s hands as quickly as possible.


Over the medium to long term, we’ll reduce income outflows overseas [through fuel imports] as much as we can via renewable energy, energy conservation and restarting nuclear power plants. We’ll also advance policies that bring as much income into the country as possible by encouraging inbound [foreign visitors] and exports. Such measures are important to achieve the stability of foreign exchange rates.


Q: You laid out your vision for a “new capitalism” in a speech in the City of London.


A: I talked about the importance of expanding investment in people, in terms of both flows and stocks, for creating a virtuous cycle of growth and distribution.


On the flow side, wages are key. The public and private sectors need to cooperate to create a social atmosphere in which it is normal and natural for pay to rise. On the stock side, investment in vocational training and recurrent education, along with promoting a shift from savings to investment, are vital. I will mobilize all policy measures in advancing the “Doubling Asset-Based Incomes Plan.”


For investment in science, technology and innovation, we’ll earmark the funding we need as well as drum up private-sector investment. We aim for 30 trillion yen in overall government investment in research and development, and 120 trillion yen in combined public and private investment, during the five years from 2021.


[Promoting] investment in startups will require a set of integrated measures, such as drawing leading overseas universities, drastically expanding opportunities for involvement in public procurement, and attracting overseas venture capital.


In green initiatives, 150 trillion yen in new investments will be raised over the next decade through public-private collaboration. We will use investment promotion measures that integrate regulation, such as energy efficiency standards, and financial support, such as assistance to promote long-term large-scale investments, as a package.


We’ll closely review digital-related systems and regulations, identifying more than 40,000 analog-era regulations and reviewing them in one fell swoop over a three-year period.


Q: You opted not to raise taxes on financial income in the fiscal 2022 tax system revision.


A: We have to think carefully about where that sits in our overall policy priorities, including distribution and growth policies. With distribution, we’ve been particularly focused on policies

related to wage growth, such as wage-related tax incentives.


Taxes on financial income have been a major discussion topic among the ruling coalition and the Liberal Democratic Party’s tax panel. It’s an issue that the coalition needs to consider as a whole. I hope to come out with the “new capitalism” action plan by June, and I want to use that to make our priorities clear.


Q: Does that mean it’s not currently a high priority?


A: Well, it’s one option, and it is being debated among the ruling coalition and the LDP tax panel. There were various discussions about it late last year. It’s still being discussed, and the government will make a decision based on where those talks go.


Q: The Financial Services Agency is starting to discuss streamlining quarterly disclosures for listed companies. Are you thinking at all about going further and eliminating quarterly earnings reports?


A: I’d like the [FSA’s] Financial System Council to continue weighing that from this summer on.


Q: The LDP has recommended increasing defense spending, for which the ceiling had been 1% of gross domestic product, to 2% of GDP or more within five years. Japan’s defense spending allocates far less to science and technology than the U.S. Isn’t that a failing from a defense perspective?


A: Defense budgets in the U.S. and Europe should be judged a bit differently from Japan. Japan’s defense capabilities need to be fundamentally improved in light of the current changes in the international situation. As we revise our defense documents, including the national security strategy due out late this year, I want to radically strengthen our defense capacity.

I see this as a whole-of-country effort, not just the Defense Ministry. We’re discussing not only the ministry’s budget, but also what is necessary to protect people’s lives and livelihoods. That will tie in to building up the deterrence and response capabilities of the Japan-U.S. alliance. I want to have calm and realistic discussions about what we need to protect the public.


Q: Nikkei reported that China has set up in Xinjiang an object similar to an Airborne Warning and Control System (AWACS) plane used by Japan’s Self-Defense Forces. Could you address concerns that China is using this object for training against the SDF?


A: I am aware of the report. We do not make comments that could disclose the level of our intelligence-gathering capability. But this reflects a lack of transparency by China, and we are seriously concerned about the rapid growth of Chinese military activities. We will be closely monitoring relevant developments with heightened interest.


Q: Some members of the LDP are pushing for next year’s Group of Seven summit to be held in Hiroshima.


A: The government is still in the middle of considering potential sites.


Q: As prime minister, do you think that Hiroshima is a good candidate?


A: I think it’s a strong contender. While we need to make a levelheaded decision based on objective factors, we also will think about the summit venue from the point of view of what kind of message we want to send out to the world.


Q: How many seats do you hope to win in the upper house election this summer?


A: Generally speaking, we will aim for maintaining a majority as the ruling camp. I will discuss specific goals after I affirm what sort of messaging we as the party leadership plan to send ahead of the vote.


Q: Nikkei will host the Future of Asia conference from May 26-27.


A: We are seeing new developments in Ukraine and are fighting the novel coronavirus. With next year marking the 50th anniversary of friendship and cooperation between Japan and the Association of Southeast Asian Nations, it will be extremely meaningful for Asian leaders to come together.


Japan holds a very unique position in the world. We are surrounded by nuclear powers — China, North Korea and Russia. We are the only country to have experienced atomic bombings. We also have some of the world’s most advanced technologies and among the most in financial assets and are grappling with challenges no other country has dealt with before. There’s a rapidly growing role that only Japan can fill at this historic juncture.

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