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
March 8, 2016
I am Taro Aso, Minister of Finance and Minister of State for Financial Services. For starting this meeting of the committee, I will present my key policy directions on fiscal policy, financial administration, and other affairs at this committee.
(Current state of the Japanese economy and basic approach to fiscal policies)
The Japanese economy is in the process of overcoming deflationary stagnation as a result of initiatives toward economic revitalization that have been implemented during the three years under the Abe Cabinet. Corporate ordinary profits hit a record high, and the employment and income situation is also surely improving.
We must continue efforts to consolidate the virtuous economic cycle led by private demand. To realize a “Robust Economy,” we will make the prior economic policies even more solid.
Meanwhile, the declining birthrate and aging population could destabilize the foundation of the social security system that underpins the people’s peace of mind. At this time, when the Japanese economy is overcoming deflationary stagnation, we will squarely tackle the structural issue of the declining birthrate and aging population.
Moreover, in order to make the social security system sustainable, it is essential to maintain fiscal sustainability. In order to achieve the goal of bringing the primary balance into surplus by FY2020, we will steadily implement initiatives towards “overcoming deflation and revitalizing the economy,” and expenditure and revenue reforms that sufficiently take account of the roadmap for reforms, based on “The Plan to Advance Economic and Fiscal Revitalization,” which was formulated last year.
(Summary of the budget for FY2016 and outline of the tax and tariff system revision)
Next, I will explain the outline of the budget for FY2016 and the tax system revision.
Under the budget for FY2016, we will tackle important challenges, including realizing a society in which all citizens are dynamically engaged. In addition, as the budget of the first year of “The Plan to Advance Economic and Fiscal Revitalization,” this budget limits the growth in general expenditure to approximately 470 billion yen compared with the previous fiscal year in line with the benchmark set under the plan, and government bond issues are reduced by around 2.4 trillion yen compared with the previous fiscal year, aiming to realize economic revitalization and fiscal consolidation simultaneously.
As for the tax reform for FY2016, from the perspective of establishing the virtuous economic circle, we will encourage companies to enhance their profit-earning power and become active in making investments and raising wages by expanding the tax base and lowering the tax rate as the corporate tax reform.
Furthermore, in order to fulfill our responsibility to pass the social security system on to the next generation and secure the trust of the markets and the international community in Japan, we will make every possible effort to ensure appropriate economic and fiscal management and securely implement the consumption tax rate hike to 10% in April next year. At the time of the tax hike, we will introduce the reduced tax rate system with consideration given to low income earners. We will also be implementing other essential tax-related measures.
We will also introduce other necessary tax system revisions.
Moreover, in the area of tariff reform, we will extend the application period of temporary tariff rates, and will review tariff rates on individual products.
Besides the above, regarding international finance, we will take measures to strengthen the functions of the Japan Bank for International Cooperation to support overseas infrastructure projects aiming to encourage overseas expansion of Japanese companies.
(Basic concepts on the future of financial regulatory policy)
Next, I would like to elaborate on the current financial regulatory policy.
To firmly establish a virtuous economic cycle, it is important for financial institutions to support corporate activity by performing high-quality financial intermediation.
We will encourage financial institutions to provide finance and support businesses based on proper evaluation of their customers’ business potentials, so that their customers can enhance their productivity.
Also, we will establish a legal framework to respond to the environmental changes in the financial sector such as the rapid progress of integration between of finance and information technology.
Regarding the capital market, we will work to further improve the flow of funds that contribute to sustainable growth of the economy while securing market integrity and efficiency.
In addition, we will actively contribute to overall optimization of the global financial regulatory framework.
Japan’s financial system as a whole is sound and stable at present, and we will, with vigilance, keep a close watch over the impact of domestic and international economic developments and market trends on Japan’s financial system.
(Key points of new bills*)
The Bills which we will ask you to deliberate on, related to the Ministry of Finance, are the Bill to Partially Amend the Act on Special Measures to Secure the Necessary Financial Resources for the Implementation of Measures for Reconstruction following the Great East Japan Earthquake and the Act on the Special Issuance of Government Bonds to Secure the Necessary Financial Resources for Fiscal Management, the Bill to Partially Amend the Income Tax Act etc., the Bill to Partially Amend the Customs Tariff Act, and the Bill to Partially Amend the Japan Bank for International Cooperation Act.
Also, the bill related to the Financial Services Agency is the Bill to Partially Amend the Banking Act, etc. to Respond to the Environmental Changes Such as Advances in Information Technology.
We will explain the details of these bills later, so I hereby ask you to deliberate on these matters and give your approval.
*Titles of the bills are provisional translations based on their Japanese titles.
In this speech, I have stated 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 Oie and all other members of the committee.
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