Following is the transcript of CNBC's interview with Fumio Kishida, Chairman of LDP Policy Research Council & Former Minister Foreign Affairs of Japan at the Credit Suisse Asian Investment Conference in Hong Kong. The interview was broadcast on Squawk Box on 22 March 2018.
All references must be sourced to a "CNBC Interview'.
Interviewed by CNBC's Akiko Fujita.
Fumio Kishida: This incident has led to the Japanese public questioning the integrity of the overall administration, the politicians and the government. It's not just a personal issue, but a serious matter, threatening the trust in the political system. Because of that, the Prime Minister as well as all of the politicians and government officials need to work together to rebuild the trust in the system. And of course the one thing we have to do is, we really need to clarify what the facts are in this case. At the same time, lawmakers have to focus on the broader culture, meaning creating jobs, including the budget and passing legislation. That is what we have to focus on going forward.
Akiko Fujita (AF): Let's talk about Abenomics, because all the data seems to point to momentum that's building. And yet there is still some weakness there. Growing income inequality. We haven't seen the kind of wage growth that the Prime Minister has set out to achieve. And of course we are still well off that two percent inflation target. What is your assessment of Abenomics five years on?
Fumio Kishida: Five years of various economic policies, have led to tangible results. The nominal GDP, corporate earnings and the employment rate have all improved significantly. But these benefits haven't translated into meaningful wage increases, and a boost in consumption. These are areas that still need improvement. In order for corporations to increase wages, the government has put forward some initiatives, including a tax benefit to companies that increase wages. But even if wages do increase, people aren't likely to spend more, because of anxiety about the future. We have to address that, by working on a fiscal consolidation and also dealing with low birth rates and the aging society. If we create this cycle and then eliminate their concerns, they will start spending. That will lead to a positive economic cycle.
AF: You talk about where Abenomics is right now. How concerned are you about the protectionist talk that is coming from the White House right now? The trade tariffs that are being slapped on steel and aluminum. Is that going to weigh on the Japanese economy?
Fumio Kishida: We need to protect free trade as a guiding principle for Japan. In terms of the tariffs proposed by the U.S. government, we really need to communicate to them what we are doing and what is really happening on the Japanese side. Japan represents a small portion of the U.S. trade deficit, I believe it is 8 percent. We also need to really convey how Japanese investments in the U.S. have led to job creation there. The reality of the Japan-U.S. economic relationship needs to be identified and communicated to them clearly. Between the two countries we have the U.S.-Japan Dialogue, led by Vice President Mike Pence and Deputy Prime Minister Taro Aso. Using this communication channel, using this framework, we can explain what is going on in Japan and hopefully they can come up with a reasonable response.
To be honest, as for this upcoming LDP Presidential election, I have not really decided whether to run for the leadership post. Right now, I am the chairman of the policy research committee in the LDP, meaning I am responsible for the party's policies and the budget. Until the budget is passed in the parliamentary sessions, I have to fulfill my responsibilities. Once the budget is passed, I'll take a look at the political environment domestically, and make a decision on whether I will be a candidate or not. While it is important to consider who I am or what I can do, it's most important to ask 'Who is the best leader for Japan?' Next year is a crucial year for Japan. What leadership will be the most ideal for Japan? Who should be the leader? We have to approach the LDP leadership election in this context. And based on those factors, I would like to make my decision on whether I am going to be a candidate or not.