TOKYO — Japan’s prime minister has affirmed his commitment to reaching a broad trade deal with the United States and 11 other Pacific Rim nations, even as Tokyo stands accused of refusing to budge on the thorny issue of agricultural tariffs.
The Trans-Pacific Partnership free-trade agreement is a crucial component of Shinzo Abe’s plans to revive Japan’s economy after two “lost decades” of stagnation and falling prices, and the prime minister says reviving the economy is his top priority.
“My mission is to make sure that the Japanese economy really gets out of the deflation that has continued for more than 15 years,” Abe said this week during a wide-ranging interview with Lally Weymouth, The Washington Post’s senior associate editor, in which he talked about relations with China and the United States and his vision for the economy.
The economy is a political life-or-death issue for Abe, who has been able to advance his foreign policy agenda — including plans to allow Japan’s military to shake off some of its post-war shackles — partly because the economy was improving.
But boosting growth through freer trade has proven elusive for Abe.
TPP negotiations between the United States and Japan, the two largest members of the bloc, have stalled, partly over Japan’s reluctance to open its agricultural markets. The tariff on imported rice is 778 percent.
With both sides set to meet again Saturday ahead of the Asia Pacific Economic Cooperation meetings in Beijing, Abe voiced optimism that the negotiations were nearing an end.
“I think it is arriving at the final stage,” Abe said, adding that he has instructed his trade minister, who walked out of a meeting with his U.S. counterpart in September, to work toward closing the deal.
On the U.S. side, prospects for political approval of the agreement are widely viewed as having improved this week after Republicans won control of the Senate. The party traditionally supports such trade deals and is considered more likely to give President Obama “fast track” authority to proceed.
Abe has learned a lot, his aides say, since he had to cut short his first stint as prime minister in 2007, the result of health problems and a series of political scandals in his cabinet.
In the intervening years before he returned to power at the end of 2012, Abe spent time studying economics — his weak point during his first tenure — and has returned to office much more confident, they say.
This time around, he has embarked on an ambitious “Abenomics” plan to kick-start Japan’s moribund economy by pumping in money, launching huge public works programs and making structural reforms to overhaul parts of the economy that had been holding it back, such as the labor market.
While his reforms initially gave the economy a boost, the gloss now appears to be coming off Abenomics.
Official data showed that the economy suddenly shrank in the second quarter, largely because the government raised the consumption tax by 3 points, to 8 percent, in April. It was the first time in 17 years that the tax had gone up, and the sudden increase in prices after years of deflation led consumers to put away their pocketbooks.
Abe is now weighing whether to go ahead with a second planned increase, to 10 percent, for October 2015. He has said he will wait for the latest quarterly data, due Nov. 17, before deciding whether to press ahead.
He is being pulled in both directions by members of his party: the fiscal hawks who want to tackle Japan’s enormous public debt — at twice the size of the economy, it is the largest in the developed world — and those who say that if he focuses on boosting growth, the debt will fix itself.
“Our thinking is to raise it once again next year, up to 10 percent,” the prime minister said.
But reflecting his concern that raising the consumption tax again might amount to shooting the economy in the foot, Abe signaled that he had not yet made a decision.
“We should never see a situation where the economy will lose steam so that tax revenue will not increase,” he said.
His biggest priority is pulling Japan out of its 15-year deflationary spiral. While prices are no longer falling in Japan, they are not rising much, either.
Warning that it was hard to persuade Japan to shrug off its “deflationary mind-set,” the Bank of Japan last week announced another huge cash infusion for the economy. It said that it would increase its asset-buying plan by as much as $200 billion, to almost $800 billion annually.
The move was viewed not just as an attempt to boost inflation — the bank has signaled that it’s unlikely to hit its target of 2 percent inflation by early next year — but also as giving the government cover to increase the consumption tax again.
A panel of 45 experts has been chosen to help the prime minister decide whether to increase the sales tax. Five of the eight experts who met during a first session this week said the prime minister should go ahead with the increase.
“We are aiming at simultaneously attaining economic revitalization and fiscal consolidation,” Abe said. “This is the only way to go.”