Speech on Fiscal Policy by Minister of Finance Shiokawa
in the 153rd Session of the National Diet
November 9, 2001
In line with the previously approved Advanced Reform Program, the government has prepared the Fiscal 2001 Supplementary Budget (Article One, Article One of the Special Account, and Article One of the Budgets of Government Agencies). Before presenting it to you for discussion, I would like to take this opportunity to state my views on the government’s basic thinking on fiscal policy for the immediate future, and to briefly outline the contents of the Supplementary Budget.
( The Recent Economic Situation and the Advanced Reform Program )
First, I would like to focus on the recent economic situation and the previously approved Advanced Reform Program.
Looking at the international economic circumstances surrounding Japan, it is clear that the world economy has been witnessing a slowdown. One of the reasons is that the US economy, which had been the locomotive behind the world economy, has been decelerating since the second half of last year because of a slump in IT and IT-related industries.
Amid these movements of the world economy, the circumstances of the Japanese economy are severe: exports, production, and plant and equipment investment have decreased, and employment has worsened, due partly to the so-called hollowing out of industry. Uncertainty about the prospects of the economy has also increased because of the terrorist attacks in the US in September. Economic movements, both domestic and overseas, deserve continued and increased attention in the immediate future.
In such circumstances, the government thinks it important, as the basis for managing the economy, to actively promote various structural reforms from the long and medium-term standpoint in order to drive sustained development led by private demand such as private consumption, while paying close attention to changes in the economy.
Based on this stance, on October 26, the government decided on the Advanced Reform Program, which is comprised of policy measures that must be decided and implemented in advance of others in terms of the promotion of structural reform.
To vitalize the economy, we specified in the Program that we will powerfully promote deregulation measures that will contribute to employment creation as well as review taxation on securities and further accelerate the final disposal of non-performing loans as part of the structural reform of the securities markets and the financial system. We also specified in the program that, in order to cope with the increased unemployment and bankruptcies that may occur in the course of advancing structural reform, we will take further measures with regards to safety nets for employment and small and medium-sized enterprises. Furthermore, regarding measures particularly urgent for accelerating structural reform, we will achieve electronic government, promote information technology in schools, secure day nurseries for all children, accelerate the building of necessary waste disposal facilities, create new industries by promoting science and technology in local communities, and promote PFI which contributes to the revitalization of cities.
Regarding taxation on securities, we have already submitted to the Diet the Bill for Partial Amendment of the Special Tax Measures Law, etc. The Bill provides that, from January 2003, capital gains on securities will be made subject to a separate tax system based on self assessment, where tax rates shall be lower and carry-overs of losses-offset from past transactions shall be permitted. Moreover, as an emergency and exceptional measure, no tax will be imposed on capital gains on listed stocks of value of less than 10 million yen that have been newly purchased before the end of 2002.
Next, I would like to explain our approach with respect to the terrorist attacks in the US.
These attacks, which took the lives of so many people, were extremely depraved and unacceptable acts, and I would like to again express my deep sorrow and heart felt sympathy for the victims.
In connection with the terrorist attacks, the Japanese government has been taking appropriate measures, in areas such as financial system stabilization, in unison with frameworks for international cooperation such as the G7 so that there will be no confusion in the global or the Japanese economic system. Japan has also taken measures, such the freezing assets of those connected with the Taliban, to prevent the supply of funds to terrorists.
( Outline of the Fiscal 2001 Supplementary Budget (Article One, Article One of the Special Account and Article One of the Budgets of Government Agencies) )
Next, I would like to outline the Fiscal 2001 Supplementary Budget (Article One, Article One of the Special Account and Article One of the Budgets on Government Agencies).
First, with regard to expenditures, the government has allocated a total of 1 trillion yen for the Advanced Reform Program: 550.1 billion yen for employment measures, 251.1 billion yen for measures for small and medium-sized enterprises, and 198.9 billion yen for urgent projects needed to accelerate structural reform. It has also allocated 49.9 billion yen for emergency countermeasures against terrorism, 26.5 billion yen for measures related to bovine spongiform encephalopathy (BSE), 313.9 billion yen for disaster measures, and 259.8 billion yen as tax money to be allocated to local governments. The budget has also provided for funds for any particularly urgent and pressing items such as additional required expenses. Although these additional expenditures total 2 trillion 995.5 billion yen, this budget at the same time anticipates that the government will reduce previously approved expenses, etc.
As for revenues, this budget expects a decrease of 1 trillion 102 billion yen based on actual tax revenues received to date. It also incorporates last fiscal year’s settlement surplus of 458.9 billion yen as well as anticipates an increase in other revenues.
Incidentally, the incorporation of net settlement surpluses into the Government Bonds Consolidation Fund based on Clause 6 of the Public Finance Law will not be made. For the disposal of those surpluses, the government will separately submit for your discussion a Bill for the Special Disposal of the Settlement Surpluses of the Fiscal 2000 Revenues and Expenditures.
As a necessary measure to cover the deficiency of revenues resulting from the above measures, the government will additionally issue government bonds totaling 1 trillion 682 billion yen. This measure will put the total issue of government bonds for fiscal 2001 at 30 trillion yen and the bond dependency rate of the current budget at 35.8%.
As a result, the total fiscal 2001 general account budget after supplementation increases by 1 trillion 61 billion yen from the initial budgetary amount in both revenues and expenditures, coming to a total of 83 trillion 713.3 billion yen.
In connection with the above supplementation of the general account budget, necessary revisions will be made in the special account budgets and the budgets of agencies associated with the government.
As for the Fiscal Investment and Loan Program, in order to implement the Advanced Reform Program, the current supplementary budget allocates a total of 61.7 billion yen to the Development Bank of Japan and the Japan Scholarship Foundation.
This concludes my explanation of the fiscal 2001 supplementary budget.
The government has prepared the current supplementary budget, focusing on the urgent current issue of employment measures, based on its belief that resolution of structural problems, while adhering to the principles of fiscal policy, is essential to the revitalization of the Japanese economy.
After discussing any questions or comments you may have concerning this budget, I would ask you for your prompt acceptance of it.