January 24, 2025

Before requesting deliberation on the budget for FY2025, I would like to state the basic approach underlying the government’s fiscal policies and outline the draft budget.

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

The Japanese economy is showing positive signs, such as wage increases at the highest rate in 33 years and capital investments of the largest scale ever. It is necessary to make these signs solid and create an economy where wage growth constantly outpaces price growth, and to ensure a transition to a “growth-oriented economy driven by wage increases and investment.”

Under these circumstances, the most important issue is to increase current and future wages and incomes for all generations. We will raise productivity and added value through the improvement of the environment for wage increases including the support for labor-saving investments and promotion of investment in growth areas, and create a mechanism to increase wages and incomes. To that end, it is necessary to promptly and appropriately implement “Comprehensive Economic Measures to Foster the Safety and Security of Citizens and Sustained Growth”, which consists of the three pillars, “the growth of the national and local economies,” “overcoming high prices,” and “ensuring the safety and security of the people”, and which was approved by the Cabinet, as well as the supplementary budget for FY2024 that serves as the basis for that measures. It is also necessary to steadily implement the budget for FY2025 and the FY2025 tax reform.

At the same time, as public finances are the cornerstone of the nation’s credibility, it is essential to steadily promote reforms in both expenditure and revenue and prepare financial bases necessary for protecting Japan’s credibility and the lives of its citizens in normal times in order to respond appropriately to various issues surrounding the nation. In light of the fact that Japan’s fiscal management continue to be difficult, as shown by the worst public debt-to-GDP ratio in the world, we will work to achieve fiscal consolidation, including the realization of a primary balance surplus at an early time, under the framework of “the Economic and Fiscal Plan for New Stage”, which was presented in “Basic Policy on Economic and Fiscal Management and Reform 2024”.

In this way, based on the principle that a sound economy is the foundation of fiscal health, the government will realize fiscal consolidation while strongly advancing economic revitalization. In short, the government will achieve both economic revival and fiscal consolidation.

(Outline of the budget and the tax reforms for FY2025)

Next, I would like to explain the outline of the budget and the tax reforms for FY2025.

The budget for FY2025 will deal with the important issues that we strategically plan to address over multiple years, including “promoting investment in the fields of AI and semiconductors” and “promoting GX investment”, full-scale supporting for child-rearing based on the “Children’s Future Strategy”, and steadily “strengthening defense capabilities fundamentally”. Also, we will focus on allocating budget to the important policies, such as doubling the subsidies for local community revitalization and doubling the budget and number of staff members of the Cabinet Office in charge of disaster management.

In addition, based on “Basic Policy on Economic and Fiscal Management and Reform 2024”, we will continue current expenditure reform efforts while taking into account economic and price trends and other developments. For example, we will appropriately secure policy budgets while improving salaries of civil servants, teachers, and childcare workers and reflecting price trends.

The general expenditures will be totaled approximately 68.25 trillion yen. The total amount of the general account, including approximately 19.08 trillion yen in local allocation tax grants, and approximately 28.22 trillion yen in government bond expenditures, will be approximately 115.54 trillion yen, an increase of approximately 2.97 trillion yen from the initial budget for the previous fiscal year.

On the other hand, the government’s income from taxes and other revenues is expected to be 78.44 trillion yen, and other revenues are expected to be approximately 8.45 trillion yen. Government bonds issuance will be approximately 28.65 trillion yen, below 30 trillion yen for the first time in 17 years since FY 2008 and a reduction of approximately 6.8 trillion yen from the initial budget for the previous fiscal year.

Next, I would like to explain major expenses.

Concerning social security-related expenses, through the drug price revision, we are reducing the burden of the public while promoting drug discovery innovation and ensuring a stable supply of pharmaceuticals. In addition, we have been making various reform efforts, such as the revision of High-Cost Medical Expense Benefit to reduce the burden of insurance premium payment, including payment by the working generation while ensuring the sustainability of the system as a safety net. Moreover, we secured the budget necessary for implementing in earnest “a plan to accelerate support for children and child-rearing” based on the "Children's Future Strategy". Including the above, while taking into account economic and price trends and other developments, we have realized our vision in line with the policy of limiting the real growth of social security-related expenses to the extent owing to the aging of society.

Regarding education and science promotion expenses, we will promote work style reforms at schools and implement necessary measures regarding salaries and the number of teachers in order to improve the environment surrounding teachers. In addition, from the perspective of “promoting Japan as a nation built on science and technology”, we will strategically promote research and development in important fields, such as AI and quantum computing, and enhance support for international research and young researchers.

As for local government finances, we will reduce the issuance of local government’s temporary fiscal stimulus bonds to zero for the first time since the establishment of this system while ensuring that the total amount of local government general funds will be appropriately secured. At the same time, we will work to put finance of local governments on a sound footing through measures such as increasing the amount of debt redemption in the special account for local allocation tax and transfer tax.

Regarding national defense expenditures, amid the severe security environment, we will steadily promote the strengthening of defense capabilities based on the Defense Buildup Program and continue to secure financial resources to stably maintain Japan’s defense capabilities.

Concerning public works-related expenditures, we will promote disaster prevention and mitigation and national land resilience through institutional reforms based on the lessons learned from The 2024 Noto Peninsula Earthquake and initiatives that integrate hardware and software measures, including the use of regulatory approaches and guidance methods. We will also focus on infrastructure development and other measures to contribute to local community revitalization and improve productivity.

As for expenditures on economic assistance, we will implement ODA in an effective way from the viewpoints of solving global issues, such as climate change, and strengthening cooperation with countries in the Global South, whose presence is growing.

Regarding measures for small and medium-sized enterprises (SMEs), we will improve the environment for sustainable wage increases and other related initiatives through such measures as fair subcontracting transactions and support for management improvement and business succession.

For energy measure expenses, we issue GX Economy Transition Bonds in the special account budget for energy measures and support private-sector GX investments, which are necessary for achieving the carbon neutrality target, and also will provide financial support for mass production of next-generation semiconductors and other related initiatives within the “AI and Semiconductor Industry Foundation Strengthening Framework”.

Regarding the agriculture, forestry, and fisheries budget, in light of the amendment of “the Basic Act on Food, Agriculture and Rural Areas”, we will enhance and strengthen measures that contribute to strengthening food security. Also, we will engage in activities such as the strengthening of bases of production and resource management for making the forestry and the fisheries industry growth industries.

Concerning the reconstruction from the Great East Japan Earthquake, in order to securely implement reconstruction measures that are necessary in the final fiscal year of the Second Reconstruction and Revitalization Period, the special account budget for Reconstruction from the Great East Japan Earthquake for FY2025 will be set at approximately 660 billion yen.

Regarding the restoration and reconstruction from The 2024 Noto Peninsula Earthquake and the torrential rains that followed, we will seamlessly implement measures to meet the needs of the disaster-affected areas, including support for the reconstruction of the lives and livelihoods of the victims and infrastructure restoration.

As for the Fiscal Investment and Loan Program for FY2025, the total amount will be approximately 12.18 trillion yen in order to promote the transition to a growth-oriented economy.

Concerning the Japanese government bond management policy, we will continue to issue JGBs stably based on dialogue with market participants amid changes in the financial market situation.

As for the FY2025 tax reform, first, from the viewpoint of adjustment of tax burden in a period of rising prices and response to working hour adjustment, we will raise the basic exemption and the minimum guaranteed amount of the deduction for employment income and introduce a special exemption for parents with college-aged dependents. In addition, in order to promote capital investments by SMEs highly motivated to grow and create a virtuous circle in local economies, we will expand the tax system to strengthen the management of SMEs. Moreover, in response to changes in the international environment, we will also introduce tax measures that secure the financial resources for strengthening defense capabilities and review the tax exemption system for foreign tourists.

(Conclusion)

This concludes my explanation of the basic concept of fiscal policy, and the outline of FY2025 budget and tax reforms.

As a result of the various policies implemented to overcome deflation and efforts made by the people and companies in Japan, the economic conditions in Japan have been improving. Now, Japan is facing a crucial point as to whether we can solidify these positive signs into a sustained recovery and realize the transition from a cost-cutting economy to an economy that creates high added value.

For this reason, it is necessary to enact the budget and related bills as soon as possible.

I hereby request that the Diet understand the role that the budget for FY2025 and related bills will play in the current Japanese economy and society, deliberate on the budget 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.