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Speech on Fiscal Policy by Minister of Finance Aso at the 190th Session of the National Diet

Japanese

January 22, 2016


Before requesting deliberation on the draft budget for FY2016, I would like to state the basic approach underlying the government's fiscal policies and provide an outline of the draft budget. 

(Current state of the Japanese economy and basic approach to fiscal policies)

The Japanese economy is in the process of overcoming deflationary stagnation as a result of initiatives toward economic revitalization that have been implemented during the three years under the Abe Cabinet. Corporate ordinary profits hit a record high, and the employment and income situation is also surely improving.
We must continue efforts to consolidate the virtuous economic cycle led by private demand. To realize a "Robust Economy," we will make the prior economic policies even more solid. 
Meanwhile, the declining birthrate and aging population could destabilize the foundation of the social security system that underpins the people's peace of mind. At this time, when the Japanese economy is overcoming deflationary stagnation, we will squarely tackle the structural issue of the declining birthrate and aging population.
Moreover, in order to make the social security system sustainable, it is essential to maintain fiscal sustainability. In order to achieve the goal of bringing the primary balance into surplus by FY2020, we will steadily implement initiatives towards "overcoming deflation and revitalizing the economy," and expenditure and revenue reforms that sufficiently take account of the roadmap for reforms, based on "The Plan to Advance Economic and Fiscal Revitalization," which was formulated last year.

(Summary of the budget for FY2016 and outline of the tax system revision)

Next, I will explain the outline of the budget for FY2016 and the tax system revision. 

Under the budget for FY2016, we will tackle important challenges, including realizing a society in which all citizens are dynamically engaged. In addition, as the budget of the first year of "The Plan to Advance Economic and Fiscal Revitalization," this budget limits the growth in general expenditure to approximately 470 billion yen compared with the previous fiscal year in line with the benchmark set under the plan, aiming to realize economic revitalization and fiscal consolidation simultaneously. 

Primary balance expenditure will be approximately 73 trillion yen, while total expenditures in the general account will be approximately 96.7 trillion yen, including expenditure for national debt service.

Regarding revenues, tax revenues are expected to reach approximately 57.6 trillion yen and other revenues are estimated at approximately 4.7 trillion yen. Government bond issues are budgeted at approximely 34.4 trillion yen, a decrease of approximately 2.4 trillion yen from the initial budget for FY2015. 

Next, I will explain our key expenditures.

With regard to social security expenditure, from the perspective of establishing a sustainable social security system, we will work to optimize remuneration for medical treatment and steadily implement institutional reforms along the roadmap for social security-related reforms in order to limit the growth in the expenditure. In addition, in order to realize a society in which all citizens are dynamically engaged, we will enhance childcare support and nursing services directly linked to the "Desirable birthrate of 1.8" and "No one forced to leave their jobs for nursing care," while securing stable financial resources.

With respect to expenditure for education and science, we will rationalize the number of teachers, enhance the staffing in necessary fields, and promote university reforms and countermeasures against the aging of school buildings. Moreover , we will enhance scientific and technological capabilities, and promote system reforms for innovation creation. 

In terms of local government finance, we have given maximum consideration to local governments by securing an appropriate level of their total general revenues, while reducing local allocation tax grants, reflecting the increase in local tax revenues.

Regarding national defense expenditure, we will take necessary budgetary measures based on the Mid-Term Defense Program. We will also steadily promote the realignment of the U.S. military forces stationed in Japan in order to reduce the burden imposed by U.S. bases in Okinawa.

As for expenditure related to public works, we will make efforts toward social infrastructure improvements that are genuinely necessary for the purpose of performing tasks intended to protect the people's lives and lifestyles, such as disaster prevention and mitigation, while continuing to keep our investments prioritized.

With regard to economic assistance, ahead of the G-7 Ise-Shima Summit, we have secured a necessary amount for ODA projects in terms of both budget and volume while prioritizing measures to deal with such challenges as peace building and universal health coverage.

As for expenditure related to small and medium-sized enterprises (SMEs), we will enhance support for innovative manufacturing technology intended to improve productivity. We also plan to ensure the implementation of measures for financing. 

Regarding expenditure for energy measures, in addition to strengthening support for the introduction of renewable energy, we will promote the development of domestic resources and securing of rights in overseas resources.

Concerning the budget related to agriculture, forestry and fisheries, in order to strengthen the competitiveness of these industries, we wil promote exports and enhance efforts to improve agricultural infrastructure.

In terms of the personnel cost of national public servants, the budget accurately reflects a salary revision, a comprehensive review of the salary scale and a net reduction in personnel.
Regarding recovery from the Great East Japan Earthquake, in the FY2016 Special Account for Reconstruction from the Great East Japan Earthquake, we project a total of approximately 3.2 trillion yen in order to accelerate the reconstruction through addressing problems in each stage of reconstruction.

With respect to the Fiscal Investment and Loan Program for FY2016, we plan to allocate a total of approximately 13.5 trillion yen, properly responding to the necessary funding needs in order to implement the governmental growth strategies and deepen regional revitalization.

The total issuance amount of JGBs for FY2016, including refunding bonds, will remain very high at approximately 162.2 trillion yen, so we will appropriately implement our debt management policy based on close dialogue with the markets while maintaining our fiscal discipline.

As for the tax reform for FY2016, from the perspective of establishing the virtuous economic circle, we will encourage companies to enhance their profit-earning power and become active in making investments and raising wages by expanding the tax base and lowering the tax rate as the corporate tax reform.

Furthermore, in order to fulfill our responsibility to pass the social security system on to the next generation and secure the trust of the markets and the international community in Japan, we will make every possible effort to ensure appropriate economic and fiscal management and securely implement the consumption tax rate hike to 10% in April next year. At the time of the tax hike, we will introduce the reduced  tax rate system with consideration given to low income earners.

Futhermore, from the perspective of addressing the declining birthrate, we will introduce an income tax deduction concerning renovation for houses to acommodate three generations and implement measures to promote educational reform and regional revitalization.

We will also establish a reporting system to understand global activities and the actual situation of tax payment by multinational companies.

(Concluding remarks)

This concludes my explanation of the government's basic approach to fiscal policies and the outline of the draft budget and tax reform for FY2016.
Although achieving economic revitalization and fiscal consolidation is not an easy challenge, we have been surely making some achievements in the past three years. I am sure that the direction of the progress that we have made is not wrong. We will devote our full efforts to consolidating this progress. 

The earliest possible approval of the budget and related bills in necessary in order to overcome deflationary stagnation and realize a "Robust Economy."
I hereby request that the Diet deliberate on the budget and promptly give its approval. I also sincerely ask for the undrstanding and coorperation of all the pepole of Japan and my fellow parliamentarians, from both the ruling and opposition parties, with respect to our fiscal and other policies.

 

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