Policy Speech by Prime Minister Morihiro Hosokawa to the 129th Session of the Diet

(March 4, 1994)

The Never-ending Challenge of Reform

Ever since my government was formed in August 1993, I have worked for the three reforms of political reform, administrative reform, and economic reform under the banner of responsible change.

With one era ended yet the emerging shape of the era to come yet unclear, we have no choice but to take the initiative in identifying new paths so as to ensure a bright outlook for the future. Having chosen the path of change and its demand that we remake politics, the economy, and our society, those of us responsible for government at this historic juncture have a duty to forge ahead no matter how great the difficulties.

Political reform was this government's first priority issue, and the passage of the amendments to the political reform laws represents a major step toward the attainment of new and responsible politics. Making every effort to ensure that the laws are implemented smoothly, I intend, with the consent of both Houses of this Diet, to appoint the members of the House of Representatives Election District Advisory Commission soon and then, once their recommendations are received, to promptly submit legislation to this Diet for the actual redistricting.

Of course, I need not remind you that the real basis for rooting out political corruption and reestablishing trust in politics fundamentally has to lie in each and every politician's having a strong ethical sense. It is sad indeed that there are still widespread suspicions of structural linkages between money and politics as seen in the so-called construction scandals, and I believe it would be inexcusable should we fail to enact more effective anti-corruption measures and other systemic reforms.

Political reform is the framework within which we can achieve responsible change, and we have only just reached the starting line for those real reforms where politics must take the initiative. Realizing how little time there is until the 21st century, it is clear that we must move steadfastly toward creating a society of quality and substance that will have the international community's trust.

In laying the foundations for a new era of development, it is first imperative that we demolish those systems and practices that are no longer compatible with the needs of the times. Now that we have made some progress on political reform, it is essential that we make a determined effort for economic reform and administrative reform, both for ourselves and so that we can fulfill our responsibilities to the international community. I thus intend to take up the gauntlet of new reforms, not forgetting the essential spirit of this reform government.

Escaping Recession and Promoting Economic Reform

Seamless Fiscal Expenditures for Recovery

The thing that the people most ardently desire now is an escape from this grim recession. Although there are some bright spots, the overall picture remains one of uncertainty and dead-endedness, and we cannot take our economic future for granted. Within this, we must pay special attention to the grim employment picture.

It is thus crucial that we deploy all possible effective policy measures in a concerted and timely manner to work our way out of this situation. Thus it was that we recently drew up the Comprehensive Package of Economic Measures amounting to an unprecedented \15 trillion including income and residents tax cuts and additional measures under the third supplemental budget. Dovetailing this into the budget for fiscal 1994, we must now achieve seamless fiscal expenditures and get the economy on the road to recovery as soon as possible.

Along with ensuring strong growth for public works spending and local government projects in consideration of the state of the economy, the fiscal 1994 budget proposal represents a determined effort to promote social infrastructure improvements in preparation for the advent of the aged society, including priority investment in housing, water and sewer systems, parks, environmental facilities, and other areas impacting directly to improve the quality of Japanese life. Every possible consideration has also been paid to policies to support hard-pressed farmers and small businesspeople and to stabilize employment.

Given the critical state of the economy, I very much hope that this budget proposal will be enacted as soon as possible.

For a Freer and More Vigorous Private Sector

In addition to cyclical factors and the collapse of the speculative bubble, this recession is said to have been exacerbated by structural factors in that many of those economic structures that used to work so rationally are no longer effective. Dynamic development in the private sector, the main player in the Japanese economy, is essential if we are to resolve this problem and to ensure long-term development. I am confident that the private sector will face the current difficulties unflinchingly and will be able to overcome them, and it is to encourage and support these efforts that we must promote economic reform that, clarifying the medium-term outlook, will be conducive to business restructuring and the creation and development of new industries.

Looking specifically at deregulation, we intend to move toward making non-regulation the norm and regulation the exception in the economic sphere and to be constantly reviewing social regulations so as, inter alia, to expand business opportunities and broaden consumer choice and to enhance purchasing power by reducing the disparity between Japanese and overseas prices. We will take dramatic action with the priority on those areas that relate to promoting the more effective and appropriate use of land and encouraging housing construction, that stimulate the creation of new businesses in information telecommunications and other areas, that relate to reducing the disparity between Japanese and overseas prices in such areas as distribution and energy, and that affect import promotion. At the same time, we will work for the rigorous enforcement of the Antimonopoly Law to eliminate those anti-competitive practices that are a cause of Japan's higher prices and that inhibit the creation of new business opportunities and foreign access to Japan.

Earnest Efforts for Administrative Reform and the Promotion of Fiscal Reform

Moving from Discussion to Action on Administrative Reform

Administrative reform is an urgent issue that cannot be avoided as we seek to reform Japanese socio-economic structures and make them better suited to the new era. While there is general agreement that Japanese administrative structures and systems functioned effectively for our development from the end of the war until recently, these structures and systems have not always been able to respond adequately to the striking transformation in the socio-economic climate and the major changes in popular needs. It is impossible for administration alone to stand unchanged when there are such major changes taking place in politics and the economy.

Seeking to establish administration that is fair, transparent, and above all has the popular interest as its first priority, now is the time for us to initiate radical surgery on our administrative structures and systems. Starting with deregulation as an interface between the governmental and non-governmental sectors and considering nothing sacred, I intend to reexamine all of those systems and structures that have not kept up with the times and to promote sweeping reform including redelineating governmental and non-governmental roles, redefining the relationship between the central and local governments, and correcting the impediments posed by our over-compartmentalized bureaucracy, as well as to make an effort for the greater disclosure of administrative information.

While there has been very extensive discussion of these issues in the Provisional Council for Administrative and Fiscal Reform, the Ad Hoc Council for Administrative Reform, and other forums, the criticism remains that not enough has been accomplished in administrative reform. While we are submitting legislation to this session of the Diet to establish a committee on administrative reform, I have resolved that the question before us is that of how to achieve effective administrative reform and am determined to promote visible administrative reform.

Achieving Fiscal and Tax Reform based upon National Consensus

While I believe that our decision to implement the largest-ever income tax and residents tax cut was both necessary and justified given the current economic situation, that does not give us license to be irresponsible about the very serious fiscal situation that will exist at the end of fiscal 1994, including national bonds outstanding in excess of \200 trillion and a substantial overhang of local government bonds. It is imperative that the people understand that we cannot let the fiscal situation deteriorate unchecked and cannot leave future generations severely indebted.

If we are to avoid impairing the economy's vitality and are to respond appropriately to the needs of the times even with an aged society, it is essential that we press forward with fiscal reform and continue to work to ensure sound fiscal management, and further efforts will be needed to create a fiscal structure in which the value of national bonds outstanding does not continue to rise and rise. At the same time, we must also work for the smooth management of local finances as well. Thus it is that, in tandem with administrative reform, we are promoting thorough rationalization and prioritization of expenditures. On tax reform, we are working to promote discussion on the broad range of issues involved, including the national burden and the tax system, tax cuts and how to finance them, and how to distribute the tax burden appropriately and equitably, and hope to reach a consensus soon and to get the relevant legislation enacted by the Diet by the end of the year so as to institute a balanced tax structure combining income, consumption, asset, and other taxes and to achieve a vigorous and affluent welfare society.

Working to Create a Society of Quality and Substance

I would like to make specific proposals in the three areas of (i) structuring society for boundlessly creative individuality, (ii) structuring the foundations for a life of abundance and quality, and (iii) structuring society so that older means more vigorous.

Structuring Society for Boundlessly Creative Individuality

Looking at the world to come, I suspect the groundswell of diverse individuality will give birth to new cultural and economic activity and that will in turn become the fountainhead of new vitality. At the same time, this will constitute an important foundation enabling Japan to behave and to contribute as a responsible member of the international community. Now is the time for us to achieve new advances in science and technology, education, and information telecommunications so as to achieve this new development.

Science and technology is the driving force for the economy and the stuff of dreams for the future. Creating an environment in which scientists and engineers can engage creatively in the work they love is thus an indispensable investment in the future. It is often said that Japan lags behind in basic research and leading-edge research, but I believe Japan should play a leadership role, including international cooperation, in space, life sciences, the environment, energy, and other research areas looking ahead to the 21st century. Thus it is that, in addition to enhancing research facilities and the information infrastructure, I want to further improve the provisions for research and development, including education for boundlessly creative people and international cooperation.

At the same time, I would like to make Japan a society that radiates culture -- a society in which each individual, region, and the state projects richly distinctive culture that Japan can be proud of internationally and that works through cross-fertilization for new cultural creation. Accordingly, I will work to promote cultural, artistic, and sports activities such as fostering young artists and promoting cultural activities distinct to each region. In addition, I will place a high priority on promoting human resources development and international cultural exchanges by, for example, promoting the program to accommodate 100,000 foreign students by the beginning of the next century, further enhancing language education, and developing human resources in connection with our assistance programs so as to create a climate of dialogue in which we and our global neighbors can understand and accept our diversity better.

Using education to foster richly individual people is basic to creating a highly cultural country. There are many views of Japanese education, including that it is overly uniform or that it discourages initiative, and I want to promote educational reform aimed at creating more attractive and open education from the earliest years through university graduation.

One of the areas in which it is hoped that creative economic activity will open the way to new development in the years to come is that of information telecommunications. With the recent rapid technological advances, information is no longer limited by either space or time, and it is likely that we will be able to achieve a society early in the 21st century revolutionizing life and business as we now know them. Yet the fact is that Japanese information telecommunications has, unfortunately, not lived up to expectations. Thus it is that I want to draw up a new vision for the kind of information society that we seek from the long-term perspective as soon as possible, to make better use of information technologies in the public sector, and to develop a comprehensive package of measures including promoting the development of information telecommunications networks, fusing broadcasting and telecommunications, and promoting information education.

It should be noted that I will also work steadily to support the creation of new business opportunities in the information telecommunications sector by, for example, encouraging small businesses to go into new fields, working for flexible labor markets, activating the financial and securities markets, and promoting bold restructuring.

Structuring the Foundations for a Life of Abundance and Quality through Promoting Decentralization and Other Policies

Japan has grown to be the world's second-strongest economic power, but I suspect many of the people do not yet have a sense of true affluence in their daily lives. People in the outlying areas feel they have fewer job opportunities than in the big cities and that they do not have the same convenient access to cultural and educational opportunities, and many people in the big cities feel their lives are blighted by the unaffordability of quality housing, the trauma of commuting, and other problems. Among the causes here are the over-concentration of functions in the Tokyo area and the inadequacy of social infrastructure relating to everyday life, and it is essential that we move quickly to institute effective policies in this area.

I believe the important thing here is that each region take the initiative in exercising ingenuity to create attractive communities and that we improve the infrastructure for balanced development throughout Japan. For this to happen, the first point is that local governments close to the people must take the lead in solving their residents' problems, which means we must make a determined effort to promote decentralization, including enhancing local government finances. I thus want to draw up a basic policy outline by the end of the year detailing the basic philosophy, the issues to be addressed, and the procedures to be followed, including the possibility of new legislation.

Working for the creation of a multi-centered country, I also want to promote the dispersion of urban and industrial functions to outlying areas and to encourage the creation of efficient high-speed road, rail, and air transportation networks linking hub cities nationwide, to promote development for under-populated and mountainous regions, and more. Along with working for the further enhancement of conservation and the total range of disaster-prevention policies, I will also will continue to work vigorously for Hokkaido's overall growth and for Okinawa's development.

It is imperative that we further enhance the living-related infrastructure directly related to providing greater convenience so that all people everywhere can have a tangible sense of affluence no matter where they live. For example, we will seek to lower housing costs by promoting a dramatic restructuring of the housing industry, housing imports, and other means and will work to promote the more efficient and systematic use of land space so that people can live in bigger houses that feel less cramped and offer greater convenience. At the same time, it is necessary to steadfastly promote improvements in roads, parks, water and sewer systems, waste disposal plants, and other amenities and improvements in intra-city rail carrying capacities and other social infrastructure to alleviate commuter crowding.

The environmental and energy issues are not only important issues for those of us alive today but must be dealt with in consideration of future generations and the whole of the global community. I thus want to draw up the Basic Environment Law and to move to implement comprehensive policies as soon as possible so that we can bequeath a beautiful environment and the bounty of nature to future generations. Likewise, I want, in tandem with energy conservation and the faster development and use of alternative energy sources, to promote the peaceful use of nuclear energy premised upon assured safety.

The everyday safety and security that we enjoy in our lives is an asset that Japan can be proud of, and preserving this is one of the government's important responsibilities. Yet just as the crime picture has lately become quite grim with the increasing viciousness and ingenuity of organized criminal elements, the increasing frequency of drug-related incidents and shootings, and the fact that crime has become less localized and more international, we are also recording large numbers of traffic deaths. I intend to be unstinting in my efforts to maintain public order and to ensure public safety.

At the same time, I intend to submit comprehensive consumer protection and relief legislation, including the adoption of product liability rules, to this session of the Diet so as to enhance consumer interests in regard to product safety from the perspective of putting the consumer first.

Structuring Society so that Older Means More Vigorous

If there is anxiety about the fact that Japan now has the longest lifespan in the world and will soon become the world's first society to have very large numbers of old people and very few children, this anxiety is politics's responsibility. If we are to achieve a vigorous and cheerful welfare society in the 21st century, it is important that we draw up a comprehensive Aged Society Welfare Vision striking a balance among pension funding, health care, welfare provisions, and the other essential elements and reach a national consensus on how the envisioned welfare society is going to be supported.

To start with, I would like to structure society by the early 21st century so that any individual who so desires can find gainful employment until the age of 65. In addition to modifying the unemployment insurance system to subsidize continued employment, I also want to make an active effort in support of re-employment and re-training for older people. The government pension system is a major financial support for the elderly, and I want to ensure that it is linked to this support for continued employment and want to ensure that it is basically reformed so as to be better suited to the truly aged society of the future.

In addition, I will fundamentally review the "Gold Plan" Ten-year Strategy to Promote Health Care and Welfare for the Aged with all due heed to financing sources and will work to enhance the home-helper system and other care systems so as to create a society in which older people can enjoy good health and peace of mind. On the health insurance system and health insurance for the aged, I want to work to alleviate the cost to the patient of nursing care and to review the extent and specifics of coverage so as to enable the different systems to provide enhanced medical services responsive to the different needs of different patients.

Likewise, I will actively promote measures for the handicapped, including enhancing community access for these people under the New Long-term Program for Government Measures for Disabled Persons.

Health is a most important prerequisite to leading a rich life, and we will therefore move ahead with comprehensive policies to deal with cancer and other degenerative and intractable diseases. Along with drawing up a new ten-year strategy to defeat cancer and working to enhance the medical response to AIDS, including improving hub hospitals and advancing medical research on treatments, we will also work to contribute to the prevention and cure of AIDS on a global basis, including support for the Tenth International Conference on AIDS to be held in Japan later this year.

Today's lower birth rates, the greater numbers of women working outside the home, and other factors have meant major changes in the social environment as it impacts children and the home. This year is the International Year of the Family. For these and other reasons, I want to work to create a climate in which people can have and raise children in confidence, including enhancing the nursery provisions and creating a children's environmental fund. In addition, I want to work to enhance the home-care leave system, including the possibility of post-natal leave payments under the unemployment insurance scheme and home-care leave legislation, so that people can reconcile the needs of home and work, and I also want to promote labor policies for part-time workers.

Likewise, I will promote comprehensive policies and seek to formulate systems conducive to the creation of a joint-participation society in which women are able to take an equal part with men in the total range of political, business, and social fields.

Achieving an Economy Open to the World and Promoting Diverse Contributions Overseas

Achieving an Economy at Harmony with the International Community

It bodes well for the world economy's future that the GATT Uruguay Round was finally concluded last December after more than seven years of trade negotiations. In concluding these negotiations, Japan accepted the draft Agreement on Agriculture according rice special treatment regarding tariffication and subjecting other agricultural products to tariffication. This was a most heart-rending decision made after strenuous consideration in recognition of the broader national interest in the maintenance and strengthening of the free trading system.

Agriculture, forestry, and fisheries serve many functions, such as ensuring the stable supply of food so vital to our lives and providing restful spaces rich in tradition and local culture. Water-filled paddies and sheaves of ripe rice are symbolic of Japan, and rice farming also plays a crucial role in land conservation and environmental protection.

Thus I believe it is now all the more important that the government make every possible effort to allay the anxieties felt by farmers and to create a climate in which they can devote themselves to farming. Taking the helm of the Emergency Agriculture and Farming Area Headquarters established late last year, I am determined to make every effort to draw up a vision for agriculture's rebirth and to institute the necessary domestic measures.

Likewise for forestry and fisheries, I will also work to promote the improvement and preservation of forest resources and to promote a strong fishing industry drawing on the rich bounty of the life-sustaining sea.

Japan is currently running a massive current account surplus, and there are still insistent voices claiming that the Japanese market is closed. While some of this criticism stems from misunderstanding, I would rather see this as evidence of the high hopes people have for Japan and I believe we should take the initiative in implementing the necessary reforms in our own interest.

The economic reforms and administrative reforms now under way are responsive to the international community's expectations. Along with domestic-demand-led economic management, we need to ensure that the Japanese market is open to the rest of the world in accordance with international trade rules by promoting further deregulation and other measures to improve market access and rectify price differentials, ensuring greater transparency in government procurement procedures, strengthening the Office of Trade and Investment Ombudsman, and enhancing the import infrastructure.

I find it very unfortunate that President Clinton and I were unable to reach an agreement regarding the establishment of target values in the Japan-U.S. Framework talks recently. Recognizing that Japan's responsibilities for harmonization with the international community are now greater than ever before, I believe that we must, while firmly adhering to free-trade principles, take effective measures to achieve a highly significant decrease in our current account surplus over the medium term.

Diverse Overseas Support in International Concert

While the road to world peace and stability is by no means smooth, our course is gradually becoming clearer as the international community pools its wisdom and its efforts toward its common goals. Indeed, the peace in Cambodia and the progress in the Middle East peace talks are symbolic of the way issues can be resolved through cooperation within the international community.

The United Nations is obviously the fulcrum of the international community's efforts, and its capacities should be further strengthened so that it can respond effectively to the needs of the new era. This year will be marked by international discussion of the reform of the Security Council, and Japan intends to take an active part in these discussions and is prepared to do all it can to discharge its responsibilities in order to meet the international community's expectations.

Looking ahead, I intend to work for a more peaceful and more prosperous world of respect for diversity by drawing upon all the resources at Japan's command, including not only economic cooperation but also personnel and intellectual cooperation, and marshaling them in effective combination to make a distinctively Japanese international contribution consistent with our peace Constitution.

One of the areas in which Japan must play a larger role is that of regional conflict prevention and resolution. I believe resolving regional conflicts and stabilizing the affected regions needs a comprehensive approach that includes diplomatic efforts for peace, UN peace-keeping operations, humanitarian assistance, and reconstruction development assistance for countries that have been torn apart by violence. The process by which the conflict in Cambodia was successfully drawn to a close is one good example of this approach. Currently taking part in the UN peace-keeping operations in Mozambique, Japan intends to continue to support international efforts for peace, including dispatching election observers to El Salvador later this month, providing support for the efforts to enhance Palestinian living standards as a key to peace in the Middle East, and enhancing its humanitarian assistance to the strife-ridden areas of former Yugoslavia.

The end of the Cold War presented an excellent opportunity for arms control and disarmament. Along with continuing to firmly uphold our three non-nuclear principles, I intend to make active efforts for the non-proliferation of nuclear and other weapons of mass destruction and missiles. On the issue of nuclear non-proliferation, the way has been cleared for the IAEA to inspect the declared nuclear facilities in North Korea, but it is still necessary to get North Korea to be more forthcoming. It is thus essential that Japan continue to respond appropriately to the situation as it develops, and, maintaining close coordination with the Republic of Korea, the United States, and the other countries concerned, we will work for a peaceful resolution to this issue. Japan will also cooperate in other fields of arms control and disarmament such as in cooperating for the dismantling of the former Soviet Union's nuclear weapons and ensuring effective implementation of the United Nations Register of Conventional Arms.

Official development assistance has an important role to play in our efforts for world peace and prosperity. Japan is today the world's largest ODA donor country, and we intend to use this ODA effectively in line with Japan's Official Development Assistance Charter with an eye to encouraging the recipient countries' efforts to democratize, to ensure human rights and freedom, to shift to market economics, and to curtail military spending.

Along with using ODA and other means to contribute actively to resolving environmental issues, population issues, the AIDS epidemic, the scourge of narcotics, refugee resettlement, and other issues, Japan will take leadership initiatives in the United Nations and other international efforts on these issues.

Forging Closer and Forward-looking Relations

Japan and the United States have maintained a firm and active relationship over the past half-century. Although the relationship is currently beset with serious trade and economic issues, it is imperative that we cooperate to resolve these issues calmly and in the spirit of mutual trust. President Clinton and I have agreed that these issues must not be allowed to distort the broader Japan-U.S. relationship -- a relationship that is moving to a new plane in which each of the two countries seeks cooperation while respecting the other's positions and judgments. The efforts under way for reform in both Japan and the U.S. will strengthen this bilateral relationship. It is essential, not only for our two countries but for world peace and development, that Japan and the U.S. continue to maintain close political, security, economic, and global cooperation relations and strive to further stabilize the Japan-U.S. partnership.

The Japan-U.S. security arrangements are increasingly important for security and stability in the Asia-Pacific region, which is still fraught with destabilizing factors even after the end of the Cold War. Japan will continue to make the possession of an appropriate-scale defense capability and the maintenance of these Japan-U.S. security arrangements its fundamental defense policies. It is about twenty years since the National Defense Program Outline was adopted to provide the guidelines for Japan's defense capability, and I believe it is now necessary to reexamine the Outline's basic approach in light of the dramatic changes in the international situation and the remarkable scientific and technological advances that have been made since then. Getting ideas from a wide range of people, I hope to identify the basic directions for this process as soon as possible.

Next year marks the fiftieth anniversary of the end of World War II. Once a battlefield, the Asia-Pacific region has today developed into one of the most promising regions anywhere in the world. The November 1993 Informal APEC Economic Leaders' Meeting bringing the region's leaders together was thus a historic event marking the start of a new era of regional cooperation. Attending this Leaders' Meeting, I had candid exchanges of views with the other leaders there and got the impression that there is a gradual but unmistakable groundswell of regional unity here. Political and security dialogues affecting the entire region are getting under way in earnest, and the ASEAN Regional Forum is scheduled to be convened this year with China, Russia, and other countries also taking part. I do not intend to miss this opportunity to work to forge stable and open cooperative relations within the region.

Japan-China relations have made major strides forward with the 20th anniversary of the normalization of relations and the 15th anniversary of the conclusion of the Treaty of Peace and Friendship. I am going to visit China later this month and to hold candid exchanges of views with Chinese leaders, and I intend to work to have the cooperative relationship between Japan and China contribute even more to the international community.

In our relations with the Republic of Korea, as affirmed with President Kim Young Sam in last year's summit meeting, we want to further expand our person-to-person and cultural exchanges and to work for the natural development of our future-oriented relationship. On the question of normalizing relations with North Korea, it is essential that we continue to carefully watch their moves on the nuclear weapons development and other issues.

President Yeltsin's visit to Japan last November laid new foundations for further development in Japan-Russia relations. While the situation in Russia is now less clear after last December's parliamentary elections and this January's Cabinet reshuffle, Japan intends to make every effort for the resolution of the territorial issue and the full normalization of Japan-Russia relations in accordance with the Tokyo Declaration signed during President Yeltsin's visit to Japan and to provide the appropriate support for reform efforts.

The European Union inaugurated last November represents a further degree of integration beyond the EC, and this is also spreading to the North European countries and the countries of Central and Eastern Europe. There can be no doubting that this more-integrated Europe will have a greater voice and will play an increasingly important role in the international community. I thus intend to broaden and deepen our dialogue and policy cooperation with our European friends with whom we share common values.


It is now about half a year since this coalition government was created embodying the fervent hopes of the people for Japan's rebirth. We have confronted a number of major issues during even this short period of time, yet these trials are only natural given that we have dared to choose a new and untrod path. The people's voice my only guide in this unknown journey, I am determined to effect these great historic reforms in response to popular expectations.

In this, I ask again for your understanding and cooperation.