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New Year's Reflection by Prime Minister Junichiro Koizumi

(Provisional translation)

January 1, 2006

A Happy New Year.

This is the fifth New Year since the Koizumi Cabinet was formed with the political imperative of "Without reform there will be no growth".

Since assuming office, I have vigorously worked toward the revitalization of the Japanese economy by promoting a broad range of structural reforms embracing finance, the tax system, regulatory environment and government spending. As a result, the Japanese economy has met the financial challenge of reducing non-performing loan. Indeed, we are now entering a new phase of economic recovery, driven by the private sector without resorting to financial priming from the government. With the buds of reform growing into large trees, there must not be any stopping of this reform.

Last year, with the renewed mandate expressed by many people in Japan in the House of Representatives election, "the heart of the reform" the bill related to the privatization of Postal Services has been enacted. I will further pick up the pace of reforms including the reform of government-related financial organizations and the reform of the civil service while continuing to stand behind the policy of "leave to the private sector what it can do." As for the reform package of the three issues on subsidy, transfer of tax sources and local allocation tax, the reform of the subsidy system by approximately four trillion yen, transfer of roughly three trillion yen in tax sources from the central to local governments and a review of the local allocation tax will be implemented as originally planned under the policy of "leave to the localities what they can do."

As for economic conditions, despite the fact that recovery is lagging in some regions and industries, the economic growth rate continued to be positive for the third consecutive year due to the advancement of structural reform. In addition, the Japanese economy is starting to regain its strength as can be seen from the decline in the unemployment rate and improvement in the corporate sector earning. I will endeavor to realize further economic vitalization by utilizing the Special Zones for Structural Reform and the concept of "one region, one tourism," and by harnessing the wisdom and ingenuity of the region, together with continuing to engage in efforts to overcome deflation.

I will pursue environmental protection and economic development in tandem while at the same time engaging in the measures against terrorism and measures to prevent various domestic crimes in order to ensure the safety and reassurance of the people.

On the international scene, world peace and stability are necessary to achieve Japan's security and ongoing prosperity. I will continue to further enhance Japan's friendly relations with each country including our neighboring countries with the Japan-US alliance and international coordination as the cornerstones of our diplomatic endeavors. At the end of last year the Government of Japan decided to extend by one year the humanitarian and reconstruction assistance activities being undertaken by the Self-Defense Forces in Iraq. I intend to fulfill the responsibility of Japan as a member of the international community by providing necessary assistance in cooperation with other countries to the people of Iraq, who are working to build a peaceful democratic nation with their own hands.

There is no end to the reforms. Likewise, the reforms cannot be implemented without the support of the people. Signs of eagerness and confidence to take on the challenge of a new era are finally beginning to be seen in Japanese society. I would like to continue implementing the reforms with the cooperation of the people, accepting with due seriousness the mandate expressed by many that we should not stop reforms.

I ask for the understanding and support of the people of Japan in these endeavors. I hope that each and every one of you will have a wonderful, fruitful and fulfilling year in 2006.