Skip to Content

Speech on Fiscal Policy by Minister of Finance Aso at the 204st Session of the National Diet

Speech on Fiscal Policy by Minister of Finance Aso at the 204th Session of the National Diet

January 18, 2021

Before requesting deliberation on the third draft supplementary budget for FY2020 and the draft budget for FY2021, I would like to state the basic approach underlying the government's fiscal policies and provide an outline of the draft budgets.

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

The Japanese economy is still in a demanding situation due to COVID-19. With the supports of the first and second supplementary budgets for FY2020, it is showing the movements of picking up. Still, full attention should be given to the further downside risks to the domestic and foreign economies affected by the influence of the infectious disease.

Under these circumstances, on December 8 of last year, the Cabinet created “Comprehensive Economic Measures to Secure People’s Lives and Livelihoods toward Relief and Hope”. Through these comprehensive economic measures, we will prevent the spread of COVID-19 while supporting employment and business, promote structural change and a virtuous economic cycle for the post-Corona era and ensure safety and relief by promoting disaster prevention and mitigation and national resilience.

Recently, a state of emergency concerning COVID-19 was declared. We will carefully assess the status of infection and its impact on the economy and people’s lives. We will continue acting appropriately by steadily executing the successive supplementary budgets, including the reserve funds for measures against COVID-19, the third supplementary budget for FY2020, and the budget for FY2021.

In terms of finance, Japan is also facing structural challenges associated with the declining birthrate and an aging population. Considering the government’s policies, including the “Basic Policy on Economic and Fiscal Management and Reform 2020”, we will continue our expenditure reform efforts and pursue economic revitalization and fiscal consolidation, including the goal of bringing the primary balance into surplus by FY2025.

(Outline of the third supplementary budget for FY2020)

Next, I would like to outline the third supplementary budget for FY2020 that was submitted to the Diet for various purposes, including the implementation of the Comprehensive Economic Measures.

Regarding the general account, based on the Comprehensive Economic Measures, we are asking for approximately 19.18 trillion yen in terms of expenditures. This figure includes approximately 4.36 trillion yen for expenses related to “Containment measures for COVID-19”, approximately 11.68 trillion yen for expenses related to “Promoting structural change and virtuous economic cycle for the post-Corona era”, and approximately 3.14 trillion yen for expenses related to “Ensuring safety and relief by promoting disaster prevention and mitigation and national resilience”.

Additionally, we will compensate for a reduction in local allocation tax grants, which resulted from a decrease in national tax revenue, and will also reduce existing expenditures.

We anticipate a decrease in tax revenue of approximately 8.39 trillion yen on the revenue side, considering the recent tax collection and corporate profit trends. Regarding non-tax revenue, we expect an increase of approximately 730 billion yen and incorporate the last fiscal year’s surplus of approximately 690 billion yen.

As for the revenue insufficiency, despite the above, we will issue public bonds for approximately 22.4 trillion yen.

We will submit a necessary bill to use the surplus separately to the Diet for deliberation.

As a result, the total amount of the third supplementary budget of the general account for FY2020 increased by approximately 15.43 trillion yen from the second supplementary budget of the general account and reaches approximately 175.69 trillion yen.

We will also make the necessary amendments to the special account budget.

As for the Fiscal Investment and Loan Program, we will add approximately 1.43 trillion yen to accelerate productivity improvements, disaster prevention and mitigation, and national resilience initiatives by taking advantage of the current low-interest-rate situation, considering the Comprehensive Economic Measures. Simultaneously, we aim to promote private investments in response to changes in the social and economic structure of the post-Corona era through the program.

(Outline of the budget and the tax reforms for FY2021)

Next, I would like to provide an outline of the budget and the tax reforms for FY2021.

The budget for FY2021 and the third supplementary budget for FY2020 will be used to take all possible measures to prevent the spread of infection and protect the lives and livelihoods of the people affected by COVID-19. Simultaneously, to open up the future, the budget will steadily respond to medium- to long-term issues.

Specifically, we will take all possible measures to prevent the spread of infection by establishing the Infectious Disease Crisis Management System and improving the Public Health Center System. In preparation for unexpected changes to the situation, we will allocate 5 trillion yen as contingency funds for COVID-19. Furthermore, we will firmly respond to medium- to long-term issues, including the realization of a digital society and a green society and the construction of all-generation social security.

At the same time, overall expenditures are being reviewed, and efforts will continue to be made to reform general expenditures, which include achieving the goals outlined in the New Plan to Advance Economic and Fiscal Revitalization.

The total amount of the general account will be approximately 106.6 trillion yen, which includes approximately 66.9 trillion yen for the general expenditures, approximately 15.95 trillion yen for local allocation tax grants, and approximately 23.76 trillion yen for government bonds.

On the other hand, tax revenues are estimated at approximately 57.45 trillion yen, and other revenues will be approximately 5.56 trillion yen. Government bonds of approximately 43.6 trillion yen will be issued.

Regarding the issuance of special deficit-financing bonds, we will submit a required bill separately to the Diet for deliberation.

Next, I will explain our key expenditures.

Concerning social security expenditures, we have been securing the expenses necessary to revise nursing care fees and rewards for disability welfare services to improve staff treatment. We have made various efforts to curb expenditures, including the realization of drug price revisions every year. As a result, we have achieved the policy of keeping the essential increase in social security expenditures within the level equivalent to the expected increase due to population aging.

For expenditures for education and science, we will ration the prescribed number of teachers and school staff towards the implementation of classes for less than 35 school children. Furthermore, we will move forward with efforts to reform universities and develop safe and secure school facilities. In addition, we will enhance science and technology infrastructure and promote innovation.

In terms of local government finance, we will ensure an appropriate level of the total general revenue for local governments and give maximum consideration to local governments against the decline in national and local tax revenues.

Regarding national defense expenditures, we will respond to changes in the security environment. Accordingly, we will thoroughly improve the efficiency of procurement in line with the Medium-Term Defense Program. Simultaneously, we will steadily strengthen our defense capabilities, including new domains, such as space and cyber domains.

Concerning expenditures related to public works, we will consider disaster prevention and mitigation measures that integrate hardware and software while suppressing an increase in maintenance and renewal costs. At the same time, we will prioritize efforts towards national resilience. We will promote projects to develop infrastructure to improve productivity.

As for expenditures on economic assistance, we will strengthen support for developing countries’ health towards the global containment of COVID-19. At the same time, ODA projects will secure the necessary amount for both the budget and volume.

Regarding expenditures related to small and medium-sized enterprises (SMEs), we will enhance capital investment to promote productivity improvements and supports for business revitalization and business succession. Also, we will take all possible measures related to financing.

Turning to expenses for energy measures, in addition to promoting decarbonization through innovation, such as the transformation of renewable energy into main power sources and promoting carbon recycling, we will work to develop an energy supply network that will be resistant to disasters.

Concerning the budget related to agriculture, forestry, and fisheries, we will expand agricultural, forestry, and fishery product and food exports and improve agricultural management productivity. Based on the revised Fishery Act, we will also work on forest resource management to realize a green society and appropriate fishery resource management.

As for reconstruction from the Great East Japan Earthquake, in the first year of the Second Reconstruction and Revitalization Period, we will steadily implement efforts with close attention according to the stage of reconstruction. Therefore, we will set the special account for Reconstruction from the Great East Japan Earthquake for FY2021 to approximately 930 billion yen.

Regarding the Fiscal Investment and Loan Program for FY2021, the total amount will be approximately 40.91 trillion yen. This expenditure will cover staunch support for companies, business operators, and local governments affected by COVID-19. Also, it will accelerate innovation, business revitalization and structural transformation, and infrastructure development that will lead to productivity improvements and disaster prevention and mitigation, and national resilience promotion by taking advantage of low-interest rates.

Concerning the Japanese government bond (JGB) management policy, the total issuance amount of JGBs for FY2021, including refunding bonds, is on an unprecedented scale, at approximately 236 trillion yen. We will continue to issue JGBs stably based on close dialogue with market participants.

As for the tax reform in FY2021, we will strive to transform the economic structure and realize virtuous cycles towards the post-Corona era. Therefore, we will create measures to promote investments in digital transformation and carbon neutrality. At the same time, we will establish a special deduction limit for loss carryforwards for companies that make such investments. Furthermore, we will establish measures to encourage business restructuring by consolidating the management resources of small and medium-sized enterprises. To support household lives and private demand, we will extend the special mortgage deduction.

Also, it is an important issue to develop Japan’s financial and capital markets as one of the international financial centers and attract financial companies and highly-skilled human resources from overseas. The government will work together to tackle this issue and take the necessary tax measures.


This concludes my explanation of the government’s basic approach to fiscal policy, the outline of the draft of the third supplementary budget for FY2020, and the draft budget for FY2021.

It is necessary to overcome this crisis and steadily tackle structural issues and promote economic revitalization and fiscal consolidation to hand over the future to the next generation. For this reason, it is necessary to enact these budgets and related bills as soon as possible.

I hereby request that the Diet deliberate on the budgets and promptly give its approval. I also sincerely ask for the understanding and cooperation of all the people of Japan and my fellow parliamentarians with respect to our fiscal policies.