April 9, 1998
I would like to express my sincere appreciation for all the support provided to the approval of the FY1998 budget yesterday. On this occasion, I would also like to thank the House of Representatives and the House of Councillors for having had wide ranging and enthusiastic discussions on a variety of issues in addition to those related to the budget. My appreciation also goes to those who have made every effort for the approval of the budget.
The Japanese economy, which was greatly damaged by the aftereffects of the creation and then collapse of the bubble economy, has not yet totally recovered. The series of failures of large financial institutions last year was a symbolic aspect of this situation. Several Asian countries have also experienced financial and economic turmoil. These unfavorable conditions arising both at home and abroad have coincided and left our economy in a very serious situation. To respond to the strong hopes and expectations of the Japanese people for economic recovery, I have decided to introduce the economic measures necessary and sufficient to restore confidence, inside and outside the country, in Japan's economy and economic management, while simultaneously proceeding with structural reform. The economic policy package drafted by the ruling parties on March 27 provided me with basic guidelines. Based on this, I will formulate the economic package based on the following basic elements.
First, I will introduce a large tax reduction amounting to over 4 trillion. A \2 trillion tax reduction in individual income tax and individual inhabitants tax has already been put into effect this year. On top of this, an additional \2 trillion tax reduction will be implemented within this calendar year, while the \2 trillion temporary tax reduction will continue to be in effect next year. Besides these, we will introduce special taxation measures -special treatments that are both necessary and helpful for the Japanese people's daily lives and economic activities. There are a wide variety of opinions on issues such as welfare, education, investment, and I will examine these intensively taking into consideration these opinions.
It is also essential that taxation be designed to induce eagerness and vigor from people and businesses. In this regard, I would like to make a thorough review from a comprehensive point of view on how the individual income tax and individual inhabitants tax should be, aiming at constructing a tax system that is fair and transparent. At the same time, taxation on corporate income is also a very important issue to be addressed. Recently, the rate of corporation tax has been brought down by 3 percent, and I would further like to set the overall tax rate of corporate income taxes in line with levels widely seen in other developed countries as soon as possible within the next 3 years.
I would like to request the Tax Council of both the government and the ruling parties to start an urgent review of these issues.
Moreover, I would like to convene tomorrow the Conference on Fiscal Structural Reform which I chair and initiate discussions on the Fiscal Structural Reform Act.
The necessity of fiscal structural reform has not changed by any means. Nevertheless, in light of the severe economic situation we currently face, I believe that we should urgently examine what measures should be taken as an emergency approach, while maintaining the basic structure of the fiscal structural reform. I think that it is appropriate to consider introducing measures that enable us to add flexibility to the limit for issuing special deficit financing bonds, if it is made clear that this is an emergency measure. Even in this case, however, the government should of course seek various ways to acquire funds through its own efforts, rather than simply relying on public bonds. At any rate, I would like to keep the revision of the Fiscal Structural Reform Act at a minimum as an emergency measure, without altering the fundamentals of the law.
Second, looking ahead to the 21st century, I aim to enhance Japan's social infrastructure in order to establish a rich and robust economy and society.
In so doing, emphasis should be placed on areas as to be appreciated by the future generations.
Such areas include investment for addressing the issues of dioxins and the global environment; development of nursing homes for the aged and baby nurseries to prepare for the aging of society and the decline in the birthrate; promotion of science and technology as well as information and communications which provide the basis for future development; and education of our children -the future leaders of Japan.
Turning to the so-called 'real water' or 'pure water' argument, I am determined, after serious and thorough consideration on how the most effective economic policy measures can be developed, to accept without hesitation any fiscal burden essential for that purpose. I would not be surprised if the total fiscal burden on national and local governments, including tax reduction and public works, amounted to around Y10 trillion. I would like to stress that the total amount of the economic policy package will be over Y16 trillion, -the largest ever. We have no choice but to make it so.
To address the financial issues, we have already taken stabilization measures. We will strongly request financial institutions to promote bad loan disposal, disclose of information, thorough restructuring of financial institutions. Government, for its part, will come up with concrete measures for the improvement of liquidity of real estate and loans.
Japan should also take a leading role in contributing to the stabilization of the financial and economic situation in other Asian countries as well as the promotion of economic structural reform in these nations.
I would especially like to point out that the Japanese economy is one of the strongest in the world. Some people are spreading such a pessimistic argument that Japan has lost its vigor for economic growth. I disagree with these pessimistic views regarding the Japanese economy, as I have explained before. I am convinced that Japan will have a bright future if we can mobilize those assets of our country that we boast of proudly to the world, such as our superb human resources, ample funds, and technology to create a new age, and if we can unite together to tackle the challenges ahead. I will do my utmost to achieve a strong economic recovery for the Japanese people. I ask for your cooperation and assistance.