(Provisional Translation)

Structural Reform and Medium-Term Economic and Fiscal Perspectives (Summary)

January 18, 2002

  1. Intensive adjustment period (FY2002-2003): Aiming to overcome deflation. Structural reform with emphasis on expanding private demand and employment

    1) Taking strong and comprehensive measures to combat deflation and expedite the disposal of non-performing loans
    • Applying a brake to the fall in land prices through urban renaissance, reform of the real estate market and other measures
    • Adopting timely and appropriate monetary policy by the Bank of Japan based on "Reform and Perspectives"
    • Studying price-indexed bonds and other items which contribute to the identification of market estimation on future price trends
    • Resolving the issue of non-performing loans in the next three years at the latest
      (Recovering the financial intermediary function, reducing excess debt, leading to an expansion of consumption and investment)

    2) Promoting structural reform for the expansion of private demand and employment

    • Putting higher priority on policy measures that are effective in creating private demand and employment, and advancing regulatory reform
    • Taking steps toward restoring fiscal soundness, leading to an expansion of consumption

    Points in relation to 1: 1) and 2)
    Economic conditions are severe, but in the second half of FY2002 the economy will begin to move toward recovery centering on private demand (FY2003 will see positive growth)
    In the final phase of the intensive adjustment period, deflation will be overcome and prices will take an upward turn

    3) Preventing a deflationary spiral

    • For the present, advancing the Immediate Action Program for Structural Reform
    • Conducting policy management with consideration of an automatic fiscal stabilization function. Be flexible and bold under extremely difficult economic conditions with the threat of a deflationary spiral

  2. Throughout the entire time period (FY2002-2006): Realizing steady growth led by private demand. Bringing about the results of structural reform in an accelerated pace

    1) Japan to become world leader in human resources

    • Advancing reform toward the realization of internationally competitive universities
    • Fostering creative people with the ability to think for themselves. Diversifying and revitalizing elementary and secondary education

    2) Creating a society that offers a second chance at success and a social system that rewards endeavor, and taking an active part in the world community

    • Realizing a society that repeatedly offers opportunities based on the free choice and self-responsibility of each and every individual
    • Studying the modalities for various systems, including the tax system, for shifting from preferential treatment of savings to preferential treatment of investment
    • Advancing the creation of a suitable environment for doubling the number of business start-ups over the next five years
    • Realizing diverse working patterns and reducing the mismatch of labor supply and demand through regulatory reform and other measures
    • Based on the assumption of continuing globalization, advancing the review of overall systems through university reform, regulatory reform and other reforms in order for the Japanese people to take active roles and contribute to the world community

    Points in relation to 2: 1) and 2)
    A society that places utmost importance on people
    • People cultivate and demonstrate their ability and individuality
    • Structures in which people can be active
    • A social and natural environment that nurtures people

    3) Creating a society where people are active all their lives and both men and women participate fully

    • Ageing of the population does not mean the loss of social vitality. Realizing a society where people can be active all their lives - for example, an "active ageing society" where people in their seventies and older can work in a variety of ways
    • Realizing a society in which both men and women participate fully through creating a system that supports child-rearing and ensures that working women are not disadvantaged

    4) Fully starting up the new growth engine. Preventing hollowing out

    • The ageing of the population and environmental issues are both challenges facing Japan, but at the same time they are new opportunities for growth. Creating systems to respond to the ageing society and a recycling-based economy and society, and providing these systems to the rest of the world
    • Developing a high-quality housing stock through systemic reforms such as reform of the housing market
    • While the East Asian nations compete with Japan, they are also a promising market. Strengthening cooperation with these countries, Japan will advance together with East Asia through trade and investment
    • Realizing a nation built on a platform of scientific and technological creativity, and the world's most advanced IT nation
    • Growth and development are generated from a ceaseless metabolism. Building a corporate system which can respond in a prompt and flexible manner to changing circumstances
    • Preventing hollowing out and revitalizing regional economies through measures such as developing human capital and strengthening technological capacity

    Points in relation to 2: 3) and 4)
    Steady, private demand-led growth
    • Real growth of over 1.5% and nominal growth of over 2.5% after FY2004
    • Positively taking on the challenges of employment, ageing and regional economies

    5) Realizing simple and efficient government

    • "All that can be done by the private sector should be left in its hands" and "all that can be done in regional communities should be left in their hands" as the basic concepts
    • Improving the quality of expenditure and restraining government spending through the promotion of fiscal structural reform
    • Continuous study of the relationship between benefits and burdens
    • Wide-ranging study of a tax system appropriate to the 21st Century

    Points in relation to 2: 5)
    Efficient and sustainable fiscal structure
    • Aiming to keep the scale of government equal to or below its current size
    • Anticipating a primary balance surplus in the early 2010s

    6) Realizing unique local communities

    • National development is impossible without the diverse development of each local community
    • Through the promotion of administrative and fiscal structural reform in local government, realizing unique local communities through the use of their various assets such as human, natural, historical and cultural resources, based on regions' "spirit of self-help and self-reliance"

    7) Approach to the recycling-based economy and society and other environmental issues

    • A comprehensive response to environmental issues such as building a recycling-based economy and society, reducing waste to zero, preventing global warming, and symbiosis with nature, leading to the creation of a living environment that is secure, attractive and full of vitality, and the formation of a beautiful Japan
    • Creating a new business model through measures aiming for a recycling-based economy and society