Achieving a primary surplus by fiscal 2011 is not the most important goal for Prime Minister Taro Aso’s administration, finance and financial services minister Shoichi Nakagawa said in an interview Friday.
While the government hasn’t given up on the objective, Nakagawa stressed that a primary surplus “is not the only and the most important goal.”
Nakagawa said he would instead try to attempt two goals at the same time — shoring up the economy and restoring a primary surplus.
He also gave assurances that the government will not hike the consumption tax while the economy is in bad shape.
“When we look back to the times the consumption tax was introduced or raised to a higher rate, it is a known fact that it had a negative affect on the economy,” said Nakagawa, adding that the government should be cautious in deciding the timing for a tax hike.
Aso has said he will not raise the sales tax in the next three years.
In a joint interview, Nakagawa added that there is no way the government will be able to raise the sales tax next year unless the economy suddenly “blooms on an unimaginable scale.”
But the government has yet to come up with a way to raise ¥2 trillion in additional revenue to cover ballooning social welfare costs. Economists say a consumption tax hike is the only answer.
In 2004, the Pension Law was revised to increase government funding for the pension program from one-third to one-half by 2009.
Asked where he would find the needed funding, Nakagawa said: “I was told to come up with an idea. I’m still thinking of what to do.”
Although Nakagawa made many sweeping remarks on economic policy earlier this year before becoming finance minister, including suggesting a ¥2 trillion corporate tax cut, he has backed off most of them, saying he is in a different position now.
“I didn’t think I would serve in such a responsible post. I just expressed my way of thinking in various places,” said Nakagawa. “But if I don’t lower my tone (as finance minister), I will cause trouble.”
Nakagawa has also called for the establishment of a sovereign wealth fund to make better use of the nation’s individual financial assets, which amount to some ¥1.5 quadrillion.
“It’s necessary to study the details in the Finance Ministry and the Financial Services Agency,” said Nakagawa. “But considering the recent state of the economy,” the fund is not a top priority.
Commenting on the global financial turmoil, Nakagawa said stricter regulations may be needed in global finance to restrict short-selling and other speculative trading.
“The global trend is that we shouldn’t allow them to do whatever they want,” said Nakagawa. “It’s not something Japan can do on its own so we need to discuss the topic (with other leaders) around the world.”
Nakagawa chose his words carefully when asked to comment on former Prime Minister Junichiro Koizumi’s structural reform drive.
“I was a member of the Koizumi Cabinet for three years,” he said. “But as a politician representing midsize and small firms, farmers and a rural region, there was pain caused by his reforms even though I understand it was necessary.”