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Fiscal Policy Speech by Minister of Finance Miyazawa in the 146th Session of the National Diet

(Provisional translation)

Fiscal Policy Speech by Minister of Finance Kiichi Miyazawa in the 146th Session of the National Diet

November 25, 1999

We have submitted the draft second supplementary budget for FY1999 in response to the Policy Measures for Economic Rebirth which have been recently adopted.  In requesting the deliberation on this draft budget, I would like to state my fundamental philosophy towards the present fiscal and financial policies and give an outline of the draft supplementary budget.

 (The Current Condition of the Economy and the Policy Measures for Economic Rebirth etc.)

First of all, I will state about the current condition of the economy and the Policy Measures for Economic Rebirth which have been recently adopted.

1.   An overview of the current the current condition of the Japanese economy shows that the activities continue to improve moderately, with the influence of the Asian economic recovery in addition to the effects of various policy measures. The economy seems to have got out of the worst situation. However, considering sluggish income and the impact of corporate restructuring on employment and so on, private consumption has yet to make a sustainable recovery. As for private non-residential investment, it is expected to take some more time before enterprises start to invest actively, reflecting the disposition of the idle excess capacities has not been proceeded, although it is observed that the inventory/shipment ratio has come down to a low level. Thus, the momentum for recovery in private demand, which is the key to the autonomous recovery of the economy, remains weak.  

2.   Under such circumstances, the government adopted the Policy Measures for Economic Rebirth, with total project volume about 17 trillion yen, or 18 trillion yen in total including nursing care measures, in order to facilitate the shift from public to private demand and put the economy back onto the track to a full-scale recovery led by private demand, as well as establish a new solid foundation for economic development in the 21st century.

 3.   Recognizing that it is important, first of all, to stimulate the dynamism of private sector toward an autonomous economic recovery, the measures are designed to promote diverse and vital small and medium-sized enterprises(SMEs) and venture businesses, promote strategically focused technological innovations such as Millennium project, address deregulation and structural reforms concerning growth sectors and foundations for basic business activities, as well as eliminate concern about employment by implementing employment measures that conduce to job creation and employment stability.

 4.   In addition, based on the concept of establishing a new solid foundation for economic development toward the 21st century and ensuring the rebirth of the economy for future, the government will improve livelihood foundation and key network infrastructure in a strategic and prioritized manner and augment social infrastructures for local revitalization, as well as promote appropriate measures against natural calamities, paying due consideration to the situation of the local economies.

 5.   As for finance, the Bank of Japan has been conducting an appropriate and flexible management of monetary policy paying due consideration to the developments of the financial markets including the foreign exchange market.  The government has also been implementing measures to stabilize the financial system, such as recapitalization of financial institutions in order to strengthen the foundation for economic recovery.  Furthermore, it has endeavored to prevent credit contraction and credit crunch by securing the amount of funds, such as loans by government financial institutions, and reinforcing the credit guarantee program, so as to correspond adequately to the demand for fund of SMEs and middle ranked enterprises.  In the Policy Measures for Economic Rebirth, such measures will be further promoted, while various other measures including the reform of the securities market, liquidation of assets such as securitization of real estate, and housing financing for the promotion of housing investment will also be implemented.

 6.   With regard to taxation, an examination will be conducted and conclusions will be obtained on truly effective and appropriate measures to support small businesses and venture businesses and to promote private-sector investments.

 7.   With respect to the fiscal structural reform, we would like to devise necessary measures from a fundamental viewpoint when the Japanese economy is securely back on track to a full-scale recovery, by examining what the Japanese economy and society should be like in the 21st century.

 (Outline of the Draft Second Supplementary Budget for FY1999 )

       Next, I will explain the outline of the draft second supplementary budget for FY1999, which we have submitted this time.

 1.   As expenditures related to the Policy Measures for Economic Rebirth, the draft second supplementary budget for FY1999 comprises 3.5 trillion yen for social infrastructure investment, 773.3 billion yen for small and medium-sized enterprises financing, 200.1 billion yen for housing financing, 191.7 billion yen for employment, 927.9 billion yen for financial system stabilization, and 911 billion yen for nursing care.  In addition, the budget will cover indispensable items such as additional mandatory expenditures, while efforts will be made to reduce predetermined expenditures where possible.

 2.   Meanwhile, revenues are expected to decrease by 1.441 trillion yen considering the actual revenues so far from sources such as taxes.  In order to cover the lack of revenues after adding the 584.9 yen billion, which is the carried-over General Account budget surplus in FY1998, and taking in other expected revenue increases, government bonds of 7.566 yen trillion will be additionally issued as an inevitable measure.  The additionally-issued bonds comprise 3.826 trillion yen in construction bonds and 3.74 trillion yen in special deficit-financing bonds.  With this measure, the amount of government bond issues for FY1999 totals 38.616 trillion yen, and the ratio of total government bond issues to total government expenditures will be 43.4 %.

              As a result of these, the total amount of the general account budget for FY1999 after taking into account the draft second supplementary budget will be 89.0189 trillion yen, increasing by 6.789 trillion yen in respect of both revenues and expenditures, compared with the amount after the first supplementary budget.

 3.   In relation to this adjustment of the general account, necessary adjustments will be made for the special account budgets and the budgets for government-affiliated organizations.

 4.   The Fiscal Investment and Loan Program provides an additional 331.5 billion yen to 13 organizations including the Development Bank of Japan and the Japan Highway Public Corporation in this draft supplementary budget in order to implement the Policy Measures for Economic Rebirth.

 5.   This is the outline of the draft second supplementary budget for FY1999.

I ask of you to deliberate the draft budget and promptly give it your approval.