Prime Minister of Japan and His Cabinet  
Speeches and Statements by Prime Minister TOP

Press Conference by Taro Aso, Prime Minister
on the Formulation of the Fiscal 2009 Budget
and Other Matters

24 December 2008
(Provisional Translation)

I am pleased to announce that the formulation of the fiscal 2009 budget and of the second fiscal 2008 supplementary budget has just been completed. I thus eagerly wish to explain to the public my thinking which underlie these budgets. I wish to name the budget for fiscal 2009 a "bold, action-oriented budget to defend people's daily lives".

Countermeasures for the economy and people's daily lives
These budgets are first and foremost budgets to defend people's daily lives. The world is on the verge of a once-in-a-century recession. Abnormal economic circumstances demand exceptional responses.

Japan cannot avoid the tsunami of global recession. But by taking bold measures, we aim to extricate ourselves from this recession the earliest of all countries.

Please look at this diagram. In October we passed the first [fiscal 2008] supplementary budget. Following that, the specifics of the second supplementary budget [government proposal] were determined the other day. And today, the fiscal 2009 budget [government proposal] has been completed. We will proceed with the three sets of measures in a seamless manner, as if they were a three-stage rocket.

The total scale of the three packages reaches 75 trillion yen. The total of fiscal spending and tax reductions amounts to 12 trillion yen. Twelve trillion yen is equivalent to 2 percent of gross domestic production (GDP). The scale of these measures is among the very largest of measures undertaken by any country.

Detailed contents
What difference will these countermeasures make to your daily lives? Let me explain in more concrete terms. Please look at the second diagram.

I'll begin with employment. We will secure housing for workers whose jobs, given to them through temporary staff placement service companies, have been terminated. Employment-promotion housing facilities have already begun to accommodate such people, with decisions already reached on who will live in some 1,000 housing units.

Business managers who extend regular employment contracts to temporary staff, students whose tentative employment offers have been cancelled and "freeters" (irregular and part-time or casual employees) who are relatively older will be awarded subsidies of between 500 thousand and 1 million yen. Employment insurance premiums will also be reduced. The reduction for an average household will be around 20,000 yen a year.

Furthermore, a fund of 400 billion yen will be established for the purpose of creating new jobs. The fund would nurture businesses in future-oriented fields, such as in the areas of nursing care or catering services for the elderly.

I will now turn to the fixed-sum stipend. Twelve thousand yen will be provided per person, with children and the elderly instead receiving 20,000 yen per person. A four-person household with two children will receive 64,000 yen. By all means, please use this money. We hope that the stipend will help to alleviate the pressure on family budgets, even a little.

Countermeasures against the declining birthrate are also important. All 14 maternity check-ups will be provided without charge. The one-off childbirth and child-rearing allowance will be raised by 40,000 yen to 420,000 yen. I wish to eliminate the need to have cash at hand at the time of childbirth.

Next, on tax reductions. Tax reductions on mortgages will be increased to a maximum of six million yen, the highest level ever. Tax breaks will also be given in cases where people use their own financial resources, not loans, to modify their homes so as to conserve energy or make them "barrier-free".

In addition, automobile weight and automobile acquisition taxes will be reduced for purchases of eco-friendly cars. For example, a new two million-yen hybrid car will be exempt from these taxes whereas 146,700 yen will be imposed on a standard car of the same price at the time of purchase.

Small and medium-sized enterprises will be made exempt from inheritance and gift taxes in cases where a business is passed on to a succeeding owner without cutting jobs. This will make it easier to keep local societies and communities intact.

[Budget allocation for promoting major policies]
Now please look at this third diagram. In the fiscal 2009 budget, I will utilise an allocation for promoting major policies so as to defend our daily lives and fulfil the latent potential of our companies.

We will pay particular attention to addressing the shortage of medical doctors and deficiencies in emergency medical care. For this we will increase the number of helicopters used for medical emergencies and increase assistance to hospitals providing emergency care. The scope of countermeasures against intractable diseases will be broadened, to include those against pandemic influenza.

A Consumer Services Agency will be created to reinforce governmental administration in the area of consumer welfare. Through this I hope to enhance the public's peace of mind about what they consume.

Raising the self-sufficiency ratio of food is another important challenge. Assistance will be given to increasing the planting of wheat and other crops in rice paddies and to efforts to resolve the issue of arable land no longer under cultivation.

In addition, I intend to allocate funds on a priority basis to research in advanced technologies such as those concerning induced pluripotent stem cells (iPS cells) and regenerated cells, research areas now inviting a great deal of discussion.

Reallocation of fiscal revenues earmarked for road-related spending to general spending purposes
From fiscal 2009, fiscal revenues earmarked for road-related spending will all be reallocated to general spending purposes.

In other words, the rule that revenues from petrol taxes shall be used exclusively for road building and maintenance will be abolished, which will make it possible to use these revenues for other purposes as well. And indeed, they will be used for social security expenditures as well.

Fiscal resources, the Mid-term Programme and administrative reform
Next, I should like to explain the funding resources for these countermeasures.

1. Regarding tax revenues
First of all, with regard to tax revenues, forecasts indicate that the sharp economic downturn will result in a significant decrease in tax revenues in fiscal 2009, with combined national and local tax receipts expected to decline by 11 trillion yen compared with fiscal 2008. There is no choice but to compensate for this reduced revenue by issuing deficit-financing bonds at both the national and municipal levels.

2. Fiscal resources for Emergency Countermeasures
Meanwhile, among the countermeasures to which I have been referring, we will be able to provide the necessary resources for those covered by the second supplementary budget without any reliance on deficit-financing bonds whatsoever. Moreover, the great majority of countermeasures to be funded under the fiscal 2009 budget will make use of reserve funds and surpluses held in special-purpose budget accounts, thereby limiting the issuance of deficit-financing bonds to the greatest extent possible.

In addition, the proportion of basic pensions funded by the government will be raised to a half. This pledge is also intended to stabilise the finances of the pension system. Here too for funding we will utilise reserves that have accumulated in the special-purpose budget account for the Fiscal Investment and Loan Program rather than issue deficit-financing bonds.

However, these are all merely temporary sources of funds and cannot be called stable funding sources. In particular, the greatest challenge will be how to secure stable funding resources for the social security system so that it can give peace of mind to the public.

3. The Mid-term Programme
It is for this reason that the Cabinet approved a Mid-term Programme concerning social security and public finances from tax revenues. The decision was thereby taken to take necessary legal measures in advance so as to ensure that fundamental reform of the tax system, including that of the consumption tax, can be implemented from fiscal 2011.

These tax increases are to foster peace of mind among the public concerning the social security system, pensions, medical care and nursing care. They are intended to avoid passing the bill on to posterity.

I intend to proceed with boldness over the short term and with responsibility over the medium term. I believe that we have succeeded in taking the first step in translating this into concrete form.

4. Administrative reform
It is of course necessary to thoroughly eliminate wasteful expenditures. We will be undertaking the following administrative reforms for that end.

We will be slashing expenditures on public interest corporations by approximately 40% from the 940 billion yen appropriated in fiscal 2006. We will dissolve the independent administrative corporation "Employment and Human Resource Development Organization of Japan" and transfer its functions elsewhere. This is to include a cessation of the Vocational Museum's operations.

I will present these budgets to the regular session of the Diet, which is scheduled to be convened on 5 January. I should like them to be approved as soon as possible. It is my strong conviction that the early passage and execution of these budgets will constitute the best possible economic countermeasures. This will determine the future of Japan's economy and, indeed, the future of Japan as a nation.

The next Diet session can be expected to be very different from Diet sessions in the past. The Diet's ability to take decisions will be put to the test. I submit that the question that the public puts to the Diet is whether or not the Diet can defend their daily lives amidst this economic crisis. The Diet's political will and resolve are being tested.

The government and the ruling coalition have formulated what we consider the best possible proposal. We are certainly willing to discuss any good proposals that the opposition parties may have. However, there is simply no time for wasteful delay before reaching a final decision.

I am well aware that some argue for an election, a coalition government, or political realignment. However, we are now in the midst of an economic crisis said to occur only once in a century. This is not the time for such talk, nor in my opinion are such things even possible.

I will do everything in my power to defend the daily lives of the people. I am determined to see this crisis through. I have renewed my resolve to take on this crisis, leading the way without fear of criticism. I ask the Japanese people for their encouragement, guidance and understanding.

This completes my opening remarks.


QUESTION: First of all, with regard to the Mid-term Programme, approved some hours ago by the Cabinet and which you referred to just now, the Cabinet approved a programme that includes a fundamental reform of the tax system from fiscal 2010, including that of the consumption tax, so as to ensure peace of mind among the Japanese people regarding social security. Specifically by how much are you thinking of raising the consumption tax rate?

Minister [of Economic and Fiscal Policy Kaoru] Yosano stated the other day on television that by 2015 he would like the consumption tax raised to around 8.5-10%. In concrete terms, to what extent do you anticipate raising the consumption tax rate?

In addition, some within the ruling coalition, in particular the New Komeito, have expressed reservations on a consumption tax rate rise. How do you plan to persuade them and coordinate on this matter? Those are my two questions.

PRIME MINISTER: First of all, with regard to the increase in the consumption tax, we plan to concentrate the use of the additional revenue on social security. Various names have been suggested for this-a "Citizens' Welfare Tax" and the like-in so far as we will be concentrating on such purposes when using the revenue. This is the background against which we will ask the Japanese people to accept an intermediate level of burden-sharing as we maintain the current intermediate level of social welfare.

And as for the extent of the increase in the consumption tax, about which you asked, that is a matter for the government and the ruling coalition to examine from now on, and at this stage we have not yet determined what that percentage might be.

Regarding the New Komeito, the decision on the Mid-term Programme was taken with the New Komeito's support. So this is not going to be something we'll be debating back and forth.

QUESTION: I would like to ask about your stance on the ordinary session of the Diet.

PRIME MINISTER: About what exactly?

QUESTION: I'm wondering about your stance on the ordinary Diet session. The Democratic Party of Japan (DPJ) is calling for the separation of the stipend proposal from the broader bill, and they have indicated that if that demand is not met they will refuse to hold the Diet interpellation session. Will you agree to hold discussions with the DPJ, such as the party is?

Furthermore, if the DPJ does not allow the interpellations to be held, it is likely that parties will become increasingly confrontational and an imbroglio would ensue in the Diet. You mentioned just now your strong resolve, but in that regard I wonder to what extent you intend to take a strong hand in conducting these affairs, such as by having both Diet chambers deliberate the budget proposals simultaneously, and whether in the case of an impasse you are prepared to go so far as to dissolve the House of Representatives. I would like you to explain your attitude and your resolve.

PRIME MINISTER: Currently I have no intention of divorcing the fixed-sum stipend. We believe that the government's budget proposal represents the best possible option, so we have no intention of discussing the idea of detaching just that one item.

It is frankly impossible to say how the Diet session will go, as we just won't know until the actual time. It is a question of what transpires at the Diet Affairs Committee, the Steering Committees of the two Houses and other fora.

In addition, it is beyond my imagination to think of protracted confrontation on bills including those on tax reductions, since they are an extremely important issue for the daily lives of the people of this country. In any event, the budget proposal was formulated as we thought best, and from the point of view of defending people's daily lives, I am firmly convinced that the earliest possible passage of this bill would constitute the foremost economic countermeasure as we aim to lead the world in extricating our country from the wave of a great recession.

QUESTION: You stressed bold fiscal spending in light of the once-in-a-century financial crisis. But the process of budget formulation has taken some extraordinary twists and turns, in that the amount by which social security expenditures would be curbed, which was to have been 220 billion yen, ended up as only a little more than 20 billion yen. And the Cabinet had to take a new decision (sic) on the budget ceiling. Against all this, is it not incumbent upon you to explain what you intend to do about the policy of fiscal reconstruction?

Also, it would seem that achieving a fiscal primary balance surplus in fiscal 2011 is practically impossible. What are your thoughts on this?

PRIME MINISTER: As I mentioned in my opening statement, economic countermeasures need to be audacious in the short term and responsible in the medium term. As far as the budget proposals now formulated are concerned, they are for the short term-and we are talking about next year here-the situation demands a bold budget proposal that defends the people's daily lives and the Japanese economy.

If we also discuss the mid-term, as I said just a moment ago, we are dealing squarely with what we might call our "responsibility" to undertake fundamental reform of the tax system, with an eye on 2011.

In that regard, while I understand what you mean by asking your questions, we will be making exceptional responses to abnormal economic circumstances. I believe that otherwise it would be extremely difficult to extricate ourselves from this recession. Various research agencies and institutions, among others, have announced projections that economic activity next year will drop precipitously all over the world. And looking at past data for Japan, the degree to which our economic activity will slump will be the sharpest of any time in our country's 60-year postwar history.

Consequently we compiled these budget proposals thinking that we must undertake drastic measures in response to such a situation.

QUESTION: I don't think you answered my question on what you will do about the fiscal reconstruction policy.

PRIME MINISTER: Keeping the fiscal 2011 goal is the same as pursuing fiscal reconstruction. It would be a problem if we didn't do anything at all in this direction.

QUESTION: This is related to the question that the previous speaker posed. In other words, does all this mean that you will basically maintain Structural Reform 2006? This year's budget proposal has been criticised for failing to send a strong message, in so far as that point is still vague. Would it be correct to say that you personally are at least for the time being no longer intending to revise Structural Reform 2006?

PRIME MINISTER: When we formulated the budget, we gave full consideration to the basic principles of Structural Reform 2006 and made various decisions based on that. Accordingly, we made various efforts, trimming back where we needed to and adding where necessary. That is certainly not to say that we completely abandoned the principles of Structural Reform 2006.

QUESTION: Regarding the Mid-term Programme, there will be a House of Representatives election next year. Two election manifestos will be prepared, one by the ruling coalition and the other by the Liberal Democratic Party (LDP). In what way will they incorporate the contents on the consumption tax in the Mid-term Programme? And in particular do you intend to express your intentions as Prime Minister more extensively in the LDP manifesto? Please give us your comments on those points.

PRIME MINISTER: We issued the Mid-term Programme, just completed, which contains our strong convictions on what is required in order to ensure that we achieve the desired goal in 2011 and that the pension system provides peace of mind and can be utilised into the future without collapsing.

As for the timing of a tax rate increase, we have incorporated the prerequisite of giving due consideration to the economic situation over the next three years. Based on this I will make a request to the public as a case of responsible political conduct.

QUESTION: You said just now with regard to raising the consumption tax rate that you would do it "giving due consideration to the economic situation". Can we conclude that this means economic recovery is a prerequisite for such a hike?

PRIME MINISTER: When we start to touch on extremely complex economic data, this becomes something that might be better left to reporters of economic teams among the media. But in essence, once economies have recovered to the greatest extent possible, they then enter a period of downturn. As you are aware, there are many divergent views in the field of economics regarding the question of when is the right timing to say the economy has recovered.

As you know, we raised the consumption tax rate last time to 5% when the economy was said to be at its peak, and the economy fell sharply after that. In the past our estimate was wide off the mark, and we need to learn from such experience.

QUESTION: A few minutes ago you expressed your resolve concerning the conduct of Diet affairs. But I ask you once more: given the current situation in which obtaining the cooperation of the DPJ is not easy, as a practical matter do you have much choice other than to push Diet affairs forward by dangling the method of an overriding vote in the House of Representatives over the head of the opposition in order to ensure passage of the supplementary budget and the fiscal 2009 budget? Yet, making excessive use of that approach might cause the public to take a harsher view of your administration. With these points in mind, what is your resolve on the conduct Diet affairs?

PRIME MINISTER: We have presented tax cuts in the form of various bills. I wonder if the public will be so opposed to us utilising the "two-thirds majority" method to pass bills that give tax breaks. I think that it would be much more difficult to win public support of such approaches as voting down these bills or delaying their passage, when the failure to pass them would mean that no tax cuts will be introduced. I believe that for the public, which knows the state of the economy and how harsh things are, these tax cuts make an extremely big difference. Thus it is rather difficult for us to contemplate a situation where such bills related to the budget cannot be approved in the Diet.