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Deputy CCS Kihara: Gov’t bonds may be revenue source for defense spending

Below is an interview of Deputy Chief Cabinet Secretary Kihara Seiji. Interviewed by Kimura Yuri.

 

Question: How will the second Kishida Cabinet, which was launched on Aug. 10, implement policies?

 

Kihara: Once-in-a-decade issues, such as worldwide inflation, are occurring simultaneously. To create a government that can deal with emergencies, Prime Minister Kishida Fumio appointed cabinet ministers who have experience and a solid track record. Since the beginning, the administration has emphasized flexibility of response. The government first gives a broad overview of a policy and then listens to people’s views to promptly correct any issues that arise. This will not change.

 

Question: The seventh wave of COVID-19 continues.

 

Kihara: The government’s plan of action is to overcome the seventh wave of COVID-19 while maintaining economic activities as much as possible. We will not implement across-the-board restrictions, such as restrictions on restaurants. Rather, we will work together with the public on basic prevention measures. While it will be difficult to relax immigration restrictions during the resurgence, the depreciation of the yen is a good opportunity to attract foreign visitors to Japan. We will relax restrictions if we decide that such an action is appropriate.

 

Question: Will the government review COVID-19″s “Category 2” classification under the infectious disease law?

 

Kihara: A review will inevitably be made after the seventh wave. The government is aiming for “co-existence with COVID-19.” It will be difficult to transition to a normal situation if we must maintain a response equivalent to a Category 2 disease. On the other hand, if the classification of COVID were to be changed to Category 5 immediately, we will not be able to recommend people to be hospitalized or offer government-funded vaccinations. We should verify what should be maintained and what should be changed, including counting the total number of cases. As a result of the review, we may handle COVID-19 in manner which is effectively similar to a Category 5 disease.

 

Question: Some Liberal Democratic Party (LDP) members call for increasing Japan’s defense spending to 2% of the gross domestic product (GDP).

 

Kihara: Considering the current security environment, it is critical that we drastically strengthen our defense capabilities. We will consider what is necessary to protect Japan and steadily build up the defense budget. Government bonds are a possible source of long-term funding. We may ask the public for their cooperation on covering the financial burden. It is unwise to reduce social security spending to increase defense spending, given Japan’s declining birthrate and aging population.

 

Question: Tensions around Taiwan are increasing, with the Chinese military conducting exercises near the island.

 

Kihara: It is important to resolve disputes peacefully. China should refrain from escalating tensions. Attempts to unilaterally change the status quo over the Senkaku Islands in Okinawa Prefecture continue. Increases in China’s military spending are not transparent. Precisely because we are in such a tense situation, we will try to have a relationship where we can voice our opinions and maintain channels of dialogue.

 

Question: Will the government raise the consumption tax?

 

Kihara: What we need now is to stimulate spending, which will lead in turn to corporate investment. A consumption tax hike is not on the agenda now, as it would run counter to this idea.

 

Question: Should the policy of aggressive monetary easing be maintained for the time being?

 

Kihara: Japan’s small and medium-sized enterprises are not in good condition, and wages have yet to rise. We are not in a position at present to review fiscal and monetary policies.

 

Question: What policy do you want to most focus on?

 

Kihara: Economic revitalization. We will implement the “new capitalism” through tax reforms and the formulation of the FY2023 budget, in which the Cabinet will be involved from the initial steps for the first time. We will allocate 400 billion yen over three years to support vocational training and other “investments in people.” We plan to create a situation in which companies are praised for using their internal reserves for investments. The plan includes measures to request corporate disclosure of information, such as the cost of human resource development.

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