Press Conference by Kaoru Yosano, Minister of State for Economic and Fiscal Policy and Financial Services

(Excerpt)

November 8, 2005

Q.

The first meeting of the Council on Economic and Fiscal Policy since the reshuffle of the Cabinet will be convened tomorrow, when reforms in the area of total personnel expenses in the public sector are reportedly on the agenda. How will the discussions unfold?

A.

The Council meeting tomorrow will involve new members including myself, so some explanation will be provided in order to share an understanding of the issues at hand in the Council. Tomorrow's topic will be about reducing total personnel expenses in the public sector. It is uncertain whether the discussion will take one or two meetings, but because it relates to a target, I hope we can set a numerical one.

However, targets whose fulfillment can be guaranteed in the short run and targets that are to be pursued over a relatively long period of time--so-called nonbinding targets--are different in nature, so it is necessary to strive to fulfill short-term targets with certainty, and make efforts in all aspects to achieve them without fail.

Q.

There are reportedly plans to halve the total personnel expenses in the public sector as a percentage of gross domestic product (GDP) in ten years, but what is the rationale behind linking the personnel expenses in the public sector to economic growth?

A.

Trying to bring down personnel expenses in the public sector or medical costs to a certain percentage of GDP is one way of looking at it, but its meaning is not absolute. I have studied many things as a member of the Liberal Democratic Party (LDP) and as a member of LDP's Policy Research Council, and the No.1 target, ''5% in 5 years'', was the dominant opinion among senior members of the Policy Research Council. Although some members stated a higher figure as a medium- to long-term target, one must draw up a roadmap in concrete terms in order to achieve it. It is extremely important to work towards achieving an ambitious target, but if you cannot display a concrete roadmap you are not in a position to set up such a target.

Q.

This is a question on the debate about increasing consumption tax. Some members of the Government, including the Prime Minister, are claiming that a tax increase will undermine expenditure-reducing efforts. What is your opinion as the chairman of the study group that compiled the draft plan for the tax hike?

A.

The Prime Minister's position is to thoroughly execute expenditure cuts, and at the same time, have extensive discussions on the consumption tax.

That is why I think there is a need to engage in the consumption tax debate. If anyone thinks the consumption tax debate will undermine efforts or commitments to cut expenditure, that person probably does not fully understand how serious the fiscal situation is in Japan.

Q.

The Tokyo Stock Exchange announced that the system crash on November 1 was primarily the fault of Fujitsu, the program manufacturer. I am sure the Financial Services Agency (FSA) has received a report on this. What is your view on this report at the present stage?

A.

The FSA's position is that all the parties concerned should have a fully-prepared system to make sure this kind of thing does not happen again. Programming bugs or system problems cause an economic inconvenience to many people, both domestically and internationally, so the causes must be thoroughly investigated. Checks and tests should be repeatedly carried out on both hardware and software fronts, to prevent its recurrence.

Q.

On the subject of consumption tax, some discrepancies have arisen recently between Ministers and LDP members about the timing for increasing the consumption tax. For example, on Sunday, the Chairman of the Policy Research Council used the term ''rough-and-ready'', whereas Mr. Sadakazu Tanigaki, Minister of Finance, mentioned submitting the bill in two years' time. Discussions on the tax hike are believed to have already begun, but there appears to be a slight perception gap over the timing. What is your point of view with respect to the timing?

A.

As can be understood from the series of documents published by the LDP Research Commission on the Tax System, we have decided to review taxes as a whole in 2007, including the enterprise tax, income tax, consumption tax and other taxes. No type of tax will be left out. The LDP's policy is to discuss and review taxes as a whole, and I believe progress should be made according to the steps decided by the LDP.

Q.

A merger between Tokyo Broadcasting System, Inc. (TBS) and Rakuten, Inc. has been proposed, but there has been some criticism against Rakuten for acquiring TBS's shares. What are your views on this?

A.

I have little interest in this problem.

Q.

Generally speaking, how might the stock market or corporate management be affected if an incident like this arises in the future?

A.

No comment can be made about publicly-traded stocks, regardless of who the buyers and sellers are, and regardless of whether the trading takes place inside or outside the market, provided that activities are carried out within the bounds of laws and regulations.

However, there are various regulations for broadcasters including the Broadcast Law, which set out rules governing their relationship with overseas-based firms. And as there are regulations based on business laws in addition to stock-market-related regulations, they must comply with these regulations as well.

On individual problems, I am not in the position to make any comments. As stated previously, if they are to go ahead with it, they should do so in a fair manner within the bounds of laws and regulations.

Q.

In regards to the reform package of three issues on central and local government finances, the subsidy reduction targets for each Ministry were presented at the meeting attended by four Ministers yesterday. As the Minister of Economy, Trade and Industry is on a business trip today, do you mind telling us the amount of the subsidy reduction target relating to the Ministry of Economy, Trade and Industry?

A.

Mr. Nikai is overseas. From what I can remember glancing at the figures yesterday, the allocation to the Ministry of Economy, Trade and Industry is about 10 billion yen. As all expenditure was earmarked under the reform package of three issues last year, even 10 billion yen might be very tough. In any case, the Chief Cabinet Secretary will announce the exact figures at 11:00am today. They vary considerably, from 1 billion yen to slightly above 500 billion yen. The Ministries really worked hard to bear such measures last year too. As these figures have to be met on top of that, I think it will be quite tough.

(End)