Speech on Fiscal Policy by Minister of Finance Kan at the 174th Session of the National Diet
January 18, 2010
My name is Naoto Kan, and I have just been appointed to the position of Minister of Finance.
Even before the appointment, I had been involved in the administration of economic and fiscal policies, including budget compilation and tax reforms, as the Deputy Prime Minister and the Minister of State for Economic and Fiscal Policy, together with former Finance Minister Fujii. As a member of the Hatoyama Cabinet, I will continue to make my utmost efforts to achieve a politician-led, people-oriented government and bring security and vitality to the lives of the people.
(Introduction)
I would like to offer my deepest condolences to the victims of the recent earthquake in Haiti and their families, and my sincerest sympathies to all those affected by the earthquake. The Japanese Government already announced that it would extend an emergency aid grant of up to five million dollars to Haiti and has just dispatched a disaster relief team. The government will cooperate with the international community in providing substantial assistance to aid Haiti's recovery and restoration.
Now, we have prepared a draft second supplementary budget for FY 2009 in response to the recently adopted "Emergency Economic Countermeasures for Future Growth and Security." Before I request deliberation on it, I would like to provide an outline of the draft supplementary budget.
(Recent economic situation and the Emergency Economic Countermeasures)
First, I would like to describe the recent economic situation and the Emergency Economic Countermeasures.
The Japanese economy experienced a sharp downturn after the failure of Lehman Brothers. Although the economy is picking up, it is still in a difficult situation, with a self-sustaining recovery not yet on the horizon.
Looking to the future, there are risks such as a further deterioration in the employment situation and deflation. And the economy is still on weak footing to get back on a strong growth track led by domestic private demand.
In consideration of these economic conditions, the government adopted the Emergency Economic Countermeasures in December 2009. Its underlying concept is to take measures that deliver the maximum effect while minimizing reliance on fiscal policy and to put emphasis on employment, the environment and the economy as the three pillars. The policy package aims to immediately respond to the current economic situation and enhance Japan's medium- to long-term growth potential.
In the employment sector, the government will ease eligibility for employment adjustment subsidies and create employment in priority fields, such as long-term care and health care. Efforts will also be made to strengthen the effectiveness of the employment insurance system.
In the environment sector, the eco-point system for home appliances will be improved, and subsidies for eco-friendly-car purchases will be extended.
In the economy sector, an "emergency guarantee system to buttress the economy" will be established, and safety-net loans will be extended and expanded.
In addition to these initiatives, the government will endeavor to ensure security in people's life by continuing the measures to reduce financial burdens under the elderly medical care system. Support for rural development will also be provided in such forms as aid for well-planned infrastructure development by municipal governments and compensation for declines in local tax allocation due to the decrease in national tax revenues.
Based on the idea of using knowledge, not money, the government will also carry out projects whose total scale is much larger than the fiscal spending, such as the establishment of an eco-point system for housing and the enhancement of access to housing loans, while addressing reforms and deregulation in the child care, environment and energy sectors.
The effects of these measures are expected to help improve the economy. Government efforts will be focused on combating deflation and ensuring economic recovery.
(Outline of the Supplementary Budget for FY 2009 [Article 2 of the General Account and Article 2 of the Special Account])
Next, I will outline the Second Supplementary Budget for FY 2009 which we have submitted.
First, with regard to expenditures, as Emergency Economic Countermeasures, we have allocated 0.614 trillion yen for employment, 0.7768 trillion yen for the environment, 1.5742 trillion yen for the economy, 0.7849 trillion yen to ensure security in people's life and 3.4515 trillion yen to support rural development, for a total of 7.2013 trillion yen. In addition, we will reduce existing expenditures, including 2.6969 trillion yen, which is a reduction arising from the suspension of budget execution as a result of reviewing the implementation of the First Supplementary Budget for FY 2009.
As for revenues, we estimate a decrease in revenue from tax of 9.242 trillion yen in view of taxation results and corporate earnings trends etc.
In order to make up for the remaining revenue shortfall, we will have to take the additional step of issuing government bonds of 9.342 trillion yen. With this measure, the total amount of the Government Bond Issues for FY 2009 will be 53.455 trillion yen, and the Bond Dependency Ratio will be 52.1 percent.
As a result, the total amount of the second revised general account budget for FY 2009 will be 102.5582 trillion yen: an increase of 0.0846 trillion yen from the first revised budget in both revenues and expenditures.
In relation to these supplementary steps for the general account, we will also take necessary supplementary steps for the special account budget.
This concludes the outline of the Second Supplementary Budget for FY 2009.
The earliest possible passage of the Supplemental Budget and related bills is necessary in order to deal effectively with the current severe economic situation and ensure economic recovery.
I hereby request that the Diet deliberate on them and promptly give its approval.