Speech on Fiscal Policy by Minister of Finance Nakagawa
at the 171st Session of the National Diet
January 5, 2009
We have prepared a draft supplementary budget (Article 2 of the General Account, Article 2 of the Special Account, and Article 2 of the Budgets of Government Agencies) for FY 2008 in response to the recently adopted " Measures to Support People's Daily Lives " and "Immediate Policy Package to Safeguard People's Daily Lives" Before I request deliberation on it, I would like to provide an outline of the draft supplementary budget.
(Recent Economic Situation and the "Measures to Support People's Daily Lives" and "Immediate Policy Package to Safeguard People's Daily Lives")
First, I would like to describe the recent economic situation and the "Countermeasures to assist people's daily lives" and "Immediate Policy Package to Safeguard People's Daily Lives."
Currently, the global financial and capital markets are experiencing a "once in a century" crisis. It has been generating an accompanying worldwide economic downturn.
Under the influence of this crisis, the Japanese economy is also worsening, with exports and production decreasing and consumption stagnating.
In response to this economic and financial situation, the government adopted the "Measures to Support People's Daily Lives" last October and the "Immediate Policy Package to Safeguard People's Daily Lives" last December.
The primary aim of the "Measures to Support People's Daily Lives" is to ensure security in people's lives. It therefore provides emergency support to household budgets through a cash benefit and strengthens the employment safety net by establishing "Special grants to support local employment" in order to create employment opportunities in regional areas. Furthermore, the countermeasures aim to remove people's anxiety by improving support for childbirth and childrearing.
Second, these countermeasures are intended to stabilize the financial situation and the economy. They therefore ease regulations on corporate stock buy-backs in order to stabilize share prices, as well as expanding safety-net lending and emergency guarantees to the 30 trillion yen level and providing for the financing needs of small and medium-sized enterprises. In addition, the countermeasures will work to improve the economy's growth potential in the medium term via measures such as promotion of the world's most advanced research and development.
Third, the countermeasures promote regional regeneration. Along with sharply lowering expressway tolls, they take steps to bolster housing investment and strengthen disaster management capacities. Furthermore, in order to promote appropriate infrastructure that contributes to regional revitalization, they provide "Special grants for regional regeneration and countermeasures to assist people's daily lives."
The "Immediate Policy Package to Safeguard People's Daily Lives" places the highest priority on supporting employment and securing financing for corporations. Combined with the "Measures to Support People's Daily Lives" they enable decisive measures to be taken.
Responses to support employment include the creation of an "Emergency Employment Creation Program" as a means to support reemployment. It targets non-regular workers who have lost their jobs, providing support so that local governments can create employment and hiring opportunities. Furthermore, to help with housing and people's general welfare, these measures implement a lending program, along with utilizing employment promotion housing to help provide housing for people who have lost their jobs.
In order to secure financing for corporations, firstly, the extent of the Government's capital involvement will be expanded to 12 trillion yen based on the Revised Law to Strengthen Financial Functions. Ensuring the stability of financial institutions' financial base will aid the smooth functioning of the financial system. Furthermore, in order to utilize and strengthen the Banks' Shareholding Purchase Corporation, its government guaranteed funding will be 20 trillion yen. Additionally, we will utilize the Japan Finance Corporation's crisis response system.
The measures I have described, along with the "Comprehensive Immediate Policy Package" compiled last August, total approximately 75 trillion yen, about 12 trillion yen of fiscal stimulus measures and about 63 trillion yen of financial support. As for the individual steps in this series of measures, we are rapidly implementing them beginning with those most able to be put into effect quickly.
(Outline of the draft supplementary budget for FY 2008 [Article 2 of the General Account, Article 2 of the Special Account, and Article 2 of the Budgets of Government Agencies])
Next, I will outline the draft supplementary budget for FY 2008 (Article 2 of the General Account, Article 2 of the Special Account, and Article 2 of the Budgets of Government Agencies) which we have submitted.
First, with regard to expenditures related to the "Measures to Support People's Daily Lives" and "Immediate Policy Package to Safeguard People's Daily Lives," we have allocated 2.0395 trillion yen for emergency support for household budgets, 517.7 billion yen for ensuring security in people's lives, 504.8 billion yen for support for small and medium-sized enterprises, 32.1 billion yen for growth-strengthening measures, 754.6 billion yen for regional regeneration, 239.3 billion yen for housing investment and improved disaster management, 600 billion yen of support for local governments, and 160 billion yen for employment measures, for a total of 4.848 trillion yen.
Furthermore, along with adding mandatory expenditures, we will match and compensate for drops in revenue tax allocation to local governments while curtailing existing expenses.
As for revenues, estimations from taxation results and corporate earnings trends project a decrease of 7.125 trillion yen in tax revenue, but receipts of 4.158 trillion yen from investments and lending from special accounts lead to a projected increase of 4.4858 trillion yen in other revenues.
In order to make up for the remaining revenue shortfall, we will have to take the step of additionally issuing government bonds of 7.425 trillion yen. With this measure, the total amount of government bond issuance for FY 2008 will be 33.168 trillion yen, and the bond dependency rate will be 37.3 percent
As a result of these measures, the total amount of the general account budget for FY 2008, including the second supplementary budget, will be 88.9112 trillion yen: an increase of 4.7858 trillion yen from the initial budget, plus the revenues and expenditures of the first supplemental budget.
In relation to these supplementary steps for the general account, we will also take necessary supplementary steps for the special account budget and the budgets of government-affiliated agencies.
Furthermore, in order to implement these measures, we will increase the amount of the Fiscal Investment and Loan Program by 2.4068 trillion yen in this supplemental budget.
Along with this supplemental budget, we are submitting the "Bill on the Special Rules for Transfers from the Fiscal Investment and Loan Special Account for the Administration of Public Finance during FY 2008," the "Bill to Amend Part of the Tax Allocation to Local Governments Law and the Law Regarding Special Accounts," and the "Bill Concerning Special Rules on the Limit of the Total Amount of Extraordinary Grants to Upgrade Regional Roads during FY 2008." We are aware that the "Bill to Amend the Law Concerning Restriction, etc., of Banks' Shareholding, etc." will also be submitted.
This has been the outline of the draft supplementary budget for FY 2008 (Article 2 of the General Account, Article 2 of the Special Account and Article 2 of the Budgets of Government Agencies).
The swiftest possible passage of the supplemental budget and related bills is necessary in order to protect the public's daily lives and the economy.
I hereby request that you deliberate the draft supplementary budget and promptly give your approval.