Policy Statement by Taro Aso, Minister of Finance and Minister of State for Financial Services, at the Committee on Financial Affairs of the House of Councillors
October 31, 2013
I am Taro Aso, Minister of Finance and Minister of State for Financial Services.
For starting this meeting of the Committee, I will make a brief address, and then, state my basic thoughts on the future of fiscal policy and financial administration.
(The current situations of Japanese economy and basic fiscal policy)
For the first ten months, the second Abe Cabinet has been seeking to promptly extricate Japan from prolonged deflationary stagnation and to revitalize the economy by strongly promoting an integrated “three arrows” strategy comprised of the “Aggressive Monetary Policy,” “Flexible Fiscal Policy,” and “Growth Strategy for Promoting Investment.”
This set of policies is beginning to have an effect, with the moderately-recovered economy and disappearing deflation, and it is expected that the economic recovery will become more firmly established going forward.
Amid these circumstances, on October 1 the Cabinet confirmed, pursuant to regulations such as the Comprehensive Tax System Reform Act, that it would raise the rate of national and local consumption tax to eight percent from April 1 next year, in order to secure funding for social security and improve fiscal consolidation, while revitalizing the economy.
At the same time, we have decided the Economic Policy Package, not only to alleviate any reactionary impact and to address the risk of an economic downturn when the consumption tax rate is increased, but also to realize an increase of the economic growth potential and virtuous cycles leading to sustainable growth of the economy. This Package includes new economic measures worth five trillion yen. The package also includes tax reforms worth one trillion yen, which aim at stimulating private-sector investment. By implementing the package steadily, we have determined to put us firmly on track to escape deflation and revitalize the economy.
In addition to ensure that consumption tax is transferred smoothly and appropriately, we will work with the relevant ministers, pursuant to regulations such as the Act on Special Measures for the Transfer of Consumption Tax, which came into effect the other day, to implement effective measures.
(Measures for achieving sustainable economic growth and fiscal consolidation)
To bring about sustained, private-sector-driven growth, it is essential, through efforts for fiscal consolidation, to eliminate fiscal-related concerns among households and companies, to create an environment for directing more private savings into private-sector investment, and to promote expansion in personal consumption and capital investment.
In addition, to facilitate the monetary easing, it is necessary to secure confidence in government bonds and stabilize long-term interest rates. To this end, the government will need to strictly maintain fiscal discipline.
In this way, if the “three arrows” are to have a sustained impact, measures to improve fiscal consolidation will be extremely important. Based on fundamental approach, which is described in Basic Policies for Economic and Fiscal Management and Reform, decided by the Cabinet on June 14, we will promote the Japan Revitalization Strategy, decided by the Cabinet on the same day, and the Medium-Term Fiscal Plan, approved by the Cabinet on August 8, and will work to achieve both sustainable economic growth and fiscal consolidation.
Based on these initiatives, we have set fiscal consolidation targets to halve the primary deficit of the national and local governments to GDP ratio by FY2015 from the ratio in FY2010 and to achieve a primary surplus by FY2020, thereafter we will seek to steadily reduce the public debt to GDP ratio.
(Summary of the FY2014 Budget)
The budget for FY2014 will be crucial for achieving this goal of improving fiscal consolidation. The budget will focus on providing balanced funding in key areas, with the aim of improving the primary balance of the general account by four trillion yen, a goal that was included in the Medium-Term Fiscal Plan, and achieving the twin goals of private-sector-driven economic growth and fiscal consolidation.
In addition, at the same time as formulating the FY2014 budget, we will also put together a supplementary budget for FY2013 to allow us to implement new economic stimulus measures to mitigate the impact of the increase in the rate of consumption tax.
(Basic concepts on the future of financial administration)
Next, I would like to make a few remarks on the current financial administration.
To aggressively implement, in a comprehensive approach, the Abe Cabinet’s “three arrows,” which I referred to at the beginning of this speech, it will be important for financial institutions to further exercise their functions as financial intermediaries, and to support the turnaround and growth of business companies as well as revitalization of regional economies. In order to achieve this, we will encourage financial institutions to be proactive in supplying funds, including new loans to small and medium enterprises, and to support management improvement and business restructuring.
In addition, based on the Initial Implementation Policy for the Growth Strategy, which was determined by the Headquarters for Japan’s Economic Revitalization on October 1, we will provide solid support to initiatives for overcoming the deflation and bringing about robust economic growth from the financial aspect. For example, by the end of this year, we will put together comprehensive measures for making Japan’s financial and capital markets more attractive, and compile measures to support realizing and taking in Asia’s growth potential.
That aside, Japan’s financial system as a whole is sound and stable at present, and we will, with strong interest, keep a close watch over the impact of domestic and foreign economic and market developments on Japan’s financial system.
(Bills to be submitted to the extraordinary Diet session)
We will ask you to deliberate on a bill related to the Ministry of Finance, the Bill to Partially Amend Acts Relating to the Special Account, etc.
We will explain the details of this bill later, so I hereby ask you to deliberate on this matter and give your approval.
In this speech, I have stated some of my ideas relating to fiscal policy, financial administration and other affairs. I am determined to continue, with your support, to do my best in policy management.
I would appreciate the understanding and cooperation of Chairman Tsukada and all the other members of the Committee.
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