(Provisional Translation)
Fiscal Policy Speech by Minister of Finance
Kiichi Miyazawa
In the 151st Session of the National Diet
January 31, 2001
In requesting the deliberation on the draft budget for FY2001, I would like to state my fundamental philosophy towards fiscal and other future policies and give an outline of the draft budget.
(Introduction)
In the past half century after World War II, Japan recovered from the devastation of the war to achieve spectacular economic growth and built up its position in the world economy. However, toward the end of the 20th century, Japan was to face drastic changes in situations both at home and abroad. The collapse of the bubble economy and the prolonged economic stagnation thereafter no longer allow us to expect the economy to grow continuously as it did before. We are also witnessing enormous structural changes, such as the rapid aging of the population resulting from the decline in the birthrate, and the globalization of the economy accompanied by the dramatic developments in information technology.
Under such circumstances, in order for the Japanese socio-economy to achieve stable growth in the 21st century, it is important first of all to put the Japanese economy on a self-sustained recovery path. At the same time, we are also called upon to deal with various structural problems of the Japanese socio-economy.
Through these efforts we have to build the prosperity of Japan in the 21st century. To that end, we intend to make all-out efforts to tackle the following challenges in our management of fiscal and other future policies.
(Realization of self-sustained economic recovery)
The first challenge is to build a new foundation for development in the 21st century and put the economy on a self-sustained recovery path.
- Japanese economic activities on the whole continue to rise modestly. The strength is seen mainly in the corporate sector, where the autonomous nature of the recovery has become increasingly evident. However, with the employment situation remaining severe and personal consumption remaining flat in general, we must make all-out efforts to realize a smooth passing of the baton from public demand to private demand.
- With such recognition, first of all, we are smoothly and steadily implementing the supplementary budget for fiscal 2000 that was passed in the previous session of the Diet.
As for the FY2001 budget, with the utilization of the "Special Allocation Category for the Rebirth of Japan" (total: 700 billion yen), the priority is given to measures that contribute to build a new foundation for development, mainly to the following four priority areas: promotion of the IT revolution, response to environmental issues, response to the aging society, and the upgrading of urban infrastructures. We have also taken other necessary measures to put the economy back on a self-sustained recovery path. For example, we have secured a high level of public works-related budget for the third consecutive year and appropriated 300 billion yen as contingencies for public works projects. - As for taxation, in light of the change in the management environment surrounding Japanese corporations, we have improved taxation on corporate reorganization. In addition, in order to promote economic recovery, we have introduced a new system for tax credits for housing loans and will extend the period of taxation for the promotion of investments in small and medium-sized enterprises. We will also take other measures, including the postponement by two years of a plan to unify taxes on capital gains on stocks, etc. into the separate self-assessment taxation, review of the service life of digital computers, and measures to support specified non-profit organizations.
We believe that the tax reductions for individuals and corporations that have been implemented since FY1999 are contributing to the improvement of the economy.
(Promotion of fiscal efficiency, and qualitative improvement)
The second challenge is to promote fiscal efficiency and qualitative improvement.
- In the FY2001 budget, in view of the severe fiscal situation, the following measures will be taken to promote fiscal efficiency and qualitative improvement. First of all, with regard to public works, we have cancelled low investment efficiency projects after thorough review of each project. Fiscal measures for local governments will be taken to propel further transparency of national and local government finances, by issuing new Special Local Bonds and increasing the amount transferred to the Special Account for Allotment of Local Allocation Tax and Transferred Tax. Furthermore, taking the central government reform as an opportunity, fusion and cooperation of works between ministries/agencies will be promoted.
As to the amount of government bond issuance, while preparations of aids towards bankruptcies in the financial sector by the use of government bond refunds will no longer be necessary, there are factors that would increase government bond issuance due to the fiscal measures for local government as I have just mentioned in the above. In such circumstances, the issue amount of government bonds has been reduced as much as possible. As a result, the issue amount of government bonds in FY2001 will decrease by 4,292 billion yen from the initial budget for FY2000 and the ratio of government bond issues to total government expenditures is estimated to decrease by 4.1 percentage points to 34.3%. - However, Japan's fiscal situation remains in an extremely severe state, with the total long-term debt outstanding of the national and local governments estimated to reach 666 trillion yen at the end of FY2001. So, in order for Japan to have stable development, it is necessary to accomplish fiscal structural reform at any cost.
In promoting fiscal structural reform, we believe that it is necessary to discuss the establishment of an ideal taxation system, the reform of the social security system and even the relationship between the national and local governments from a broad perspective, while at the same time bearing in mind the blueprint for the desirable Japanese economy and society. Keeping in mind the problems I have just mentioned, we will discuss various economic and fiscal problems towards structural reform at meetings of the Council on Economy and Fiscal Policy and on other occasions.
(Contribution to the development of the world economy)
The third challenge is to contribute to the stable development of the world economy.
- There is no question that Japan is expected to play an active role in the realization of a free and fair international economy and its steady development, given its substantial weight in the globalized world economy. The experience of the Asian currency crisis tells us that it is more necessary than ever for Japan to strengthen cooperation with other Asian countries and to actively contribute to their economic stability. With these in mind, we will endeavor to stabilize the international monetary system, strengthen regional cooperation in Asia by promoting the "Chiang Mai Initiative" that was agreed among the Finance Ministers of ASEAN, Japan, China and the Republic of Korea.
- From the standpoint of maintaining and strengthening the multilateral free trade system, Japan will continue its efforts for an early launch of the new WTO round. And from the standpoint of supplementing this, Japan intends to conclude bilateral free trade agreements. At present, Japan is conducting negotiations with Singapore with the aim of reaching an agreement by the end of this year. In the FY2001 tariff revisions, we will conduct revisions, etc. of the preferential tariff system to apply lower tariff rates on imports from developing countries.
(Outline of the draft budget for FY2001)
Next, I will explain the outline of the draft budget for FY2001 that we have submitted to the Diet.
- First of all, as for expenditures, the amount of general expenditures totals 48,658.9 billion yen, a 1.2% increase from the initial budget for FY2000.
As for the number of regular national public servants, we are trying to reduce the number of the regular staff of administrative organs by 5,988. We are also positively promoting the streamlining and rationalization of subsidies.
The general account expenditures total 82,652.4 billion yen, a 2.7% decrease from the initial budget for FY2000. - Next, I will explain the revenue side of the budget.
As for taxes, tax revenues are expected to amount to 50.727 billion yen, incorporating the taxation revision that I have explained earlier.
Government bond issues will decrease 4,292 billion yen from the initial budget for FY2000 to 28,318 billion yen. As for deficit-financing government bond issues, we will submit a necessary bill separately to the Diet for deliberation. - As for the Fiscal Investment and Loan Program (FILP), we have aimed at focused and efficient allotment of funds in line with the purpose of the reform of the FILP. The FILP amounts to 32,547.2 billion yen, a 15% decrease from the initial plan for FY2000.
- Next, I will explain the major expenditures.
As for social security-related expenditures, we will strive to establish a stable and efficient social security system with long-term sustainability and promoting the Medical Frontier Strategy.
As for public works projects-related expenditures, we are promoting efficiency and qualitative improvement. Specifically, 272 projects will be cancelled by strictly applying the reevaluation system. The maximum priority will be given to measures that will contribute to the rebirth of the Japanese socioeconomy, such as the promotion of the IT revolution.
As for expenditures on education and science, we are promoting measures, such as those aimed at the establishment of an environment for educational reform such as the implementation small-class education, etc., the improvement of higher education and academic studies, and the promotion of science and technology by increasing competitive funding, with the aim of establishing a creative and vital nation.
As for national defense-related expenditures, we will aim at an efficient and moderate defense buildup in the first year of the new Midterm Defense Buildup Program.
As for the agriculture, forestry and fisheries-related budget, we are striving for the steady implementation of basic programs for foods, agriculture and rural areas that are based on the new basic law, and various measures focused on the securing and fostering of future workers for Japanese forestry and fisheries.
As for economic cooperation expenditures, we are promoting various measures to contribute to the stability and development of the international society, while further enhancing the efficiency and prioritization of assistance.
As for expenditures for energy measures, we are steadily implementing a comprehensive energy policy, including measures to counter the problem of global warming.
As for expenditures for small and medium-sized enterprises (SMEs), we are striving for the establishment of a management assistance system tailored to SMEs' needs, such as response to the IT revolution, and the promotion of measures focused on the creation of new businesses or business innovation. - As for local finances, we will implement new local finance measures such as the new issuance of special local bonds for three years starting with FY2001 from the standpoint of further increasing the transparency of national and local fiscal conditions. We will request that local governments review their overall expenditures and promote rationalization and efficiency in a positive manner.
(Conclusion)
This is the outline of the draft budget for FY2001.
The government intends to deal with the various economic and fiscal challenges that Japan in this new era is faced with while steering the economy towards a self-sustained recovery with the understanding and cooperation of the people.
I ask you to deliberate on the draft budget along with the related bills and promptly give your approval.