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Abe says Japan must continue efforts to fight deflation


Prime Minister Shinzo Abe said Tuesday that Japan must make further efforts to beat chronic deflation, announcing his resolve to implement an all-out growth strategy that will encourage companies to raise salaries and expand employment.

In a policy speech at the opening of an extraordinary Diet session, Abe also said the government must address deteriorating public finances, and that Tokyo will press for a successful conclusion within the year of negotiations for a U.S.-led trans-Pacific free trade accord.

"Economic recovery has yet to be truly felt throughout the country," said Abe, who has vowed to revive the economy through massive monetary easing and fiscal stimulus -- measures he has employed since taking office last December. "We are only halfway through our efforts to beat persistent deflation."

Abe's assessment indicates that despite a recent increase in economic output, he feels there is more to be done to spread positive sentiment throughout the economy, the world's third largest.

He has shifted focus to supporting companies willing to raise salaries and expand payrolls, with deregulation, tax breaks and other growth-friendly measures.

In his speech, he reiterated the government will step up such efforts over the next three years and encourage corporate capital spending, while tackling challenges such as making the electricity market more competitive and doubling incomes in the farming sector over the next decade.

Abe has said that with the sales tax rate set to be lifted to 8 percent from 5 percent next April for its first rise in nearly 20 years, he will underpin the economy with stimulus measures to cushion any negative impact on household and business spending.

On deregulation for growth, Abe told parliament he eyes making Tokyo, the host of the 2020 Summer Olympics, the "world's most advanced business city" through "thoroughly eliminating peculiar regulations and systems."

The move comes alongside government plans for establishing special economic zones for developing infrastructure and other projects relevant to Tokyo's hosting of the Olympics.

Turning to public finances, Abe said the government "aims to achieve medium- and long-term fiscal discipline goals," without clarifying any target. He reiterated that raising the sales tax rate is necessary for the government to secure funds for covering swelling welfare costs as Japan's population ages.

With the government under scrutiny over how to handle the issue of radioactive water accumulating at the crippled Fukushima Daiichi nuclear power plant, Abe rejected widespread concerns about possible negative effects on the safety of food and drinking water.

Contamination levels in food and water "have been much lower than standard levels," the premier said, promising the government will make efforts to support Tokyo Electric Power Co., operator of the plant damaged by the March 2011 earthquake and tsunami in eastern Japan.

Abe also said the government will accelerate reconstruction in areas devastated by the 2011 disasters, where some 290,000 people remain living in temporary housing.

On freeing up international trade, Abe spoke of the importance of successfully concluding the Trans-Pacific Partnership free trade talks by the end of the year, the goal set by the 12 negotiating countries. Japan has been playing a "core role" and will "contribute to creating a new economic order in the Asia-Pacific region," he said.

The TPP countries, which recently held a summit, still have work to do to address their differences on issues such as eliminating tariffs and other trade barriers. Japan, whose barriers mostly protect domestic farmers, is expected to come under further pressure from other members to decrease such protectionist measures.

On foreign and security policies, Abe again stressed they are centered on the Japan-U.S. alliance, while also showing eagerness to create a new ministerial council to enable the government to quickly respond to national security and foreign affairs issues.

Abe said the Japanese should be proud to have trodden a path as a "peaceful state" since the end of World War II. But he also said now is the time to "take action" to preserve peace into the future, reiterating his government is ready to "proactively contribute to global peace and stability."

The assertion comes as he signals his hope to revise Japan's pacifist Constitution to enhance its defense capability to better cope with a changing regional security environment characterized by China's growing assertiveness over the Japanese-administered Senkaku Islands in the East China Sea and North Korea's nuclear and missile programs.

Abe said he wants to "further deepen national debate" on the possible constitutional revision.

The so-called "shift to the right" in Japanese politics under Abe's leadership has raised the eyebrows of some countries in Asia that have experienced Japan's wartime aggression.

The speech referred to Japan Coast Guard officers and Self-Defense Forces personnel deployed around Japan's remote southwestern islands, saying they are "facing 'reality' in this instant of time and we must not look away from this 'reality,' which shows the security environment is growing increasingly severe."

While Abe did not specify any countries, Japan has been involved in territorial rows with China and South Korea over groups of islets in the East China Sea and the Sea of Japan, respectively.

Tensions with the two neighbors over the territorial rows as well as historic issues stemming from Japan's past militarism have prevented Abe from holding talks with Chinese and South Korean leaders.

On North Korea, Abe expressed his determination to settle the abductions by Pyongyang of Japanese citizens in the 1970s and 1980s while he is in office.