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

Press Conference by Prime Minister Yasuo Fukuda
on the Passage of the FY2008 Budget
and the Failure to Enact the Road-related Bill within FY2007

March 31, 2008

[Opening remarks by Prime Minister Yasuo Fukuda]

The new fiscal year begins tomorrow, and the FY2008 budget was passed last week. From the point of view of revenue, we have reduced the issuance of new government bonds for the fourth year in succession and we have managed to give a further boost to the trend toward fiscal health.

In terms of expenditure, we have focused on the essential policy issues, with budgetary allocations being made in a prioritized manner to science and technology policies as well as others that enhance growth; measures to guarantee the safety and security of the people such as those to ensure adequate numbers of doctors and sufficient disaster prevention measures; and regional vitalization measures.

However, while the budget has been passed, as of today the bill to revise the taxation system of gasoline and other road-related taxes has not yet passed. This is an unprecedented situation, as the revenue from these taxes is a precondition of the budget as a whole. I am concerned that, if the situation continues unchanged, there will be great confusion at local gas stations, and also gaping holes in the national and regional budgets.

As Prime Minister, it is my responsibility to protect the lives of the people. In order to fulfill this responsibility, I continued right up until the very last moment with my efforts to seek a meeting with the members of the opposition parties to resolve the situation. However, the House of Councillors, in which the opposition has a majority, has not held even a single debate on the bill over the space of an entire month, and time has finally run out. I find it deeply regrettable that there has been a failure to prevent the disruption of local finances and the people's lives, which could have been avoided if those involved in politics had taken a more serious approach.

The ruling coalition and the opposition parties have thus been unable to resolve the situation. The result is that the burden will be passed on to the people, and I sincerely apologize for the fact that they will have to pick up the tab for party politics.

At a press conference the other day, I pledged to make sweeping reviews of the points that need to be reviewed. First, I will root out thoughtless waste in public finances through measures that include abolishing or privatizing public interest corporations that depend largely on the road budget, and thoroughly eliminating inappropriate, non-transparent practices of senior government officials obtaining posts in related organizations after retirement from public office.

Secondly, I will abolish the system of earmarking revenue sources for roads and reallocate revenues from gasoline and other road-related taxes to the revenues used for general purposes. This will free up resources that would otherwise be used exclusively for building roads, making them available to be put to use for various policies such as global warming countermeasures, provision of health services, and countermeasures against the declining birthrate.

Thirdly, I will shorten the road development plan from ten years to five, and review the entire plan on the basis of the latest data.

These measures are to address issues that have come to light during the course of the Diet deliberations. I am determined to see them through without fail.

Despite the fact that I put forward a new proposal, I have been unable to hold talks with the Democratic Party of Japan (DPJ). It has been suggested that I could have avoided the confusion if I had accepted in their entirety the views of the DPJ, which commands a majority in the House of Councillors. However, while the DPJ insisted on reducing gasoline and other road-related taxes by abolishing the provisional tax rate, my belief was that, in the light of the current situation and the future prospects of Japan, I should not give in on this issue. There can be no doubt that from the point of view of the people even a small reduction in taxes would be preferable, especially now that prices have been risen so sharply.

However, I am responsible for the lives of the people at the national and local level, and for the overall economy of our nation. I therefore have to make a sincere appeal for the understanding of the people.

First, there is currently a global trend toward increases in gasoline taxation. Against the backdrop of this trend is the belief that increases in gasoline prices are thought to play a part in curbing the consumption of gasoline, which emits CO2 when used, and thereby help to counter global warming. As a result, gasoline is now at 250 yen per liter in the United Kingdom, and 220 yen per liter in France and Germany. If the tax on gasoline in Japan were reduced by 25 yen per liter, the price would fall to 125 yen per liter, which is half the UK price. This could send out all the wrong signals that while the world is working on global warming countermeasures, Japan is set on encouraging gasoline consumption. It simply goes against the tide of the times.

The leaders of various countries will come together this July in Toyako, Hokkaido, to discuss global warming countermeasures. Are they really going to accept the idea that the cheaper the gasoline, the better?

We are currently set to achieve the six-percent reduction in CO2 emissions stipulated in the Kyoto Protocol. Especially as we should now be focusing on environmental issues, I believe that this is not the time to reduce the tax on gasoline. In addition, abolition of the provisional gasoline tax rate, as the DPJ is demanding, would mean the loss of 2.6 trillion yen in revenue, which amounts to one-fifth of the consumption tax revenue.

The possibility thus arises that the revenue required for the construction of roads and overhead crossings planned for FY2008 may be lost, and some local governments may have no choice but to review welfare, education, and other services provided to local people. Furthermore, I have committed to taking the huge step of reallocating revenue from the gasoline tax to that used for general purposes starting FY2009.

Reallocating it to be used for general purposes would allow the revenue to be used to support policies in a range of areas other than road building, such as the environment, health services, and countermeasures against the declining birthrate; those roads that are necessary, both in the cities and the regions, would of course still be built. The issue of global warming is one that is common to the whole world. It is essential that we develop innovative energy sources in order to resolve environmental issues, and this will require vast sums to cover the development costs.

While greater demands are put on the administration, both national and local finances are saddled with huge debts. It is easy to court popularity by calling for a reduction in the price of gasoline, but without a clear future prospect this simply passes the tab on to future generations -- it is our children and grandchildren who will pay the price. I therefore request, for the sake of our children's future, that the provisional tax rate be maintained.

The provisional rate will expire tomorrow, which means that it cannot then be extended. Even if this happens, I will continue to explain my position on this issue to the people, and I will also persevere in my efforts to obtain the understanding of the DPJ and the other opposition parties. I very much hope that the House of Councillors will reach its conclusion at the earliest possible opportunity.

I have already pledged, at a recent press conference, to abolish waste in the budget for roads, but I am also determined to go further by carrying out fundamental reforms of the overall national expenditure in order to eliminate waste from the administration across the board.

Moreover, I will not limit myself to the budget for roads. I intend to carry out a thorough review of the system of contracts for public works and an intensive investigation of the public interest corporations with close links to the administration, in order to stamp out wasteful expenditure and end the non-transparent practices of retired civil servants landing positions in the private sector. Not single yen of the taxes entrusted by the people is to be wasted. I will make every effort to achieve zero waste.

Be that as it may, I am concerned that there might be disruption in various different areas if the provisional tax rate is scrapped tomorrow. Leaving aside the question of how the situation arose, now that the result is upon us it is my responsibility to minimize the disruption. A short time ago, I instructed the relevant ministers to carry out all measures necessary to ensure that there would be no disruption at gas stations and no obstacles to regional fiscal management. I will carry out measures straight away wherever immediate action is possible. From tomorrow onwards I will be maintaining a sense of urgency as I pay very close attention to any changes in the situation, and I will take any further measures that may be necessary.

There is anxiety at present over the sharp rises in the price of crude oil and the future of the economy. Against this backdrop, I will be steadily implementing measures to counteract the sharp oil price rises, and measures for financing small to medium enterprises. I will also be drawing up, this weekend, the Urgent Measures for Enhancing Growth Potential; these will include strengthening the corporate foundations of small to medium enterprises, improvements in employment, and the early implementation of projects to make public schools earthquake-resistant. I will ensure that these measures are taken in full.

I am aware that some people question my views on the revision of revenue sources earmarked for roads, which I explained the other day, doubting whether I can really do that. But does anyone really oppose reforms being made for the sake of the people? The Inaugural Declaration of the Liberal Democratic Party (LDP) of Japan states, "Politics must serve the public interest." Insofar as we all share this common starting point, the answer is self-evident. No matter what difficulties I may encounter along the way, I am fully prepared to push forward reforms for the sake of the people without flinching. In this, I call upon the people of Japan for understanding and cooperation.

Thank you very much.


QUESTION 1: There are two things I would like to ask about in relation to the implementation of the provisional tax rate. First, while I am sure you will make every effort to obtain the understanding of the DPJ, I would like to ask whether or not you intend to take advantage of the two-thirds majority of the House of Representatives and have a second vote in the event that you are unable to persuade the DPJ.

Also, if this were to be the case, it is conceivable that the DPJ may submit a motion censuring the Prime Minister. I would like to ask how you would react if the motion passed in the House of Councillors.

PRIME MINISTER FUKUDA: I will answer both those questions together. As I said a moment ago, the provisional tax rate will actually expire tomorrow, and I want to stress just how serious a problem this situation really is. I also intend to make every effort to gain the understanding of the opposition. This is what I have been saying, and I will continue my efforts today, tomorrow, and until this problem is solved. These are my thoughts on the situation, so I am not currently giving any consideration to what will happen beyond that.

QUESTION 2:Regarding a meeting with the President of the DPJ, you have stated that you are ready to accept a formal offer made by DPJ executives for a meeting, if any such offer is extended. Could you share your thought on this?

PRIME MINISTER FUKUDA:Do you mean an offer from DPJ executives?

QUESTION: It is the LDP that is ready to accept the DPJ's offer should there be one. Also, another thing, the DPJ has requested a firmer assurance regarding the reallocation of revenue to that used for general purposes, on the grounds that this is not something that has been officially authorized.

PRIME MINISTER FUKUDA: Do you mean the DPJ is requesting this?

QUESTION: Yes, that is correct. I am asking your reaction to that.

PRIME MINISTER FUKUDA: Let me answer you. First, regarding a meeting between the party leaders, for my part I would like to propose that we hold such a meeting. In proposing a meeting, however, I have to think about the substance of our talks. If the other side is prepared to come with an open mind, then for my part I would like to hold talks. I will be happy to hold talks if it seems possible that a satisfactory result could be obtained. That is my position on the issue. And the other question?

QUESTION: An assurance regarding revenue sources for roads.

PRIME MINISTER FUKUDA: And this is what the DPJ is saying, is that right?


PRIME MINISTER FUKUDA: This is something I took it upon myself to draw up, but today I gathered together the ministers concerned and confirmed it with them. We will fill in the concrete details. I am currently in discussions with the ruling coalition, which also agrees to this idea and has kindly expressed support for it.

QUESTION 3: You made your proposal in the Budget Committee, but when do you expect to make a Cabinet decision?

PRIME MINISTER FUKUDA: I intend to make a Cabinet decision on this as and when necessary. I have said that I will hold discussions with the opposition parties regarding the specific details, and as a Cabinet decision will be made with this situation in mind, it will not be for some time. What is more, I want to hold discussions between the ruling coalition and the opposition parties. Before that, however, what I am really hoping for is that the House of Councillors will reach a conclusion as soon as possible on the bill that has been submitted.

QUESTION 4: This is about the expiry of the provisional tax rate. In your opening remarks you said you apologized sincerely, and also that you would make every effort up until the last moment. Looking back, how do you now weigh up your own responsibility for the fact that this situation has arisen?

PRIME MINISTER FUKUDA: As far as responsibility goes, I have overall responsibility and thus I take responsibility for the fact that the current situation has arisen. This responsibility weighs very heavily on me.

However, the fact that there has been no conclusion and no result is not a problem that I can solve through just my own efforts, and so I will continue to seek the cooperation necessary to bring this situation to an end. This is something that is done within the Diet, and so I would like the Diet to reach its conclusion as soon as possible. I intend to continue to make my utmost efforts to bring about this conclusion; it is my responsibility to do so.

QUESTION 5: The provisional tax rate will expire tomorrow, and leaving aside how you intend to put it back into effect, be it put to a vote or by other means, I would like to ask whether you think the provisional tax rate should be restored to its original level, and also whether you would consider lowering the rate from FY2009 onward.

PRIME MINISTER FUKUDA: As I said earlier, reducing the provisional tax rate would mean leaving an unfilled hole of proportionate size in the public finances. As I said, it is the sum of 2.6 trillion yen, the equivalent of one-fifth of the revenue from consumption tax. So the question is whether or not it is acceptable to leave a hole like this.

At the same time, the budget -- and I am referring here to expenditure -- has already been decided, meaning that we need an equivalent amount of revenue to cover the expenditure. So if revenues fall short by 2.6 trillion yen, the problem then is where else are we going to get this 2.6 trillion yen from. I have yet to hear the opposition parties, and the DPJ in particular, provide an explanation. I have not yet heard anything convincing, and I believe that we need just such an explanation.

I would most certainly like to hear this explanation given to the Diet. If there is going to be this great hole in the public finances then we will be unable to allocate that sum for budget spending. This will be the cause of great problems for the regions, but the effects will not just be felt in the regions -- there is no escaping the possibility of cuts to the national budget, or that in some cases the effects may even be felt on people's incomes.

There is always the possibility of issuing deficit bonds, but given the current fiscal state the decision of whether or not to issue deficit bonds at this time calls for considerable judgment. I do not believe that this is the time to issue deficit bonds.

And then there is the question of whether or not to lower the provisional tax rate from next year onward. Given the current environmental issues, and given the current situation of year-on-year increases in expenditure for social welfare, to be frank I can say that it is rather hard to envisage reducing revenue by lowering the provisional tax rate to less than its current level. This is something to be discussed in the course of fundamental reform of the taxation system, but I think that in all probability the present level of the provisional tax rate -- I don't know whether it will still be termed "provisional tax rate" next year -- will be maintained next year as well.

QUESTION 6: The by-election to be held in Yamaguchi Prefecture on April 27 will be the first election at the national level since the inauguration of the Fukuda Administration. If at that time we are still in the situation of the provisional rate having been abolished, will you be pressing to restore it during the election campaign?

PRIME MINISTER FUKUDA: That election is an election in Yamaguchi Prefecture, and will be fought for the people of Yamaguchi Prefecture, so to be honest it is difficult for me to answer your question. It is a question of how the people of Yamaguchi Prefecture will look at this problem in combination with the particular issues of their region.

In any case, we have to consider whether or not the current situation will remain unresolved by that particular point in time, so it is not really possible for me to answer your question by making assumptions now.

QUESTION 7: You said earlier that it was extremely regrettable that the ruling coalition and the opposition parties were unable to forge a political solution. This happened in the case of the Governor of the Bank of Japan, and has happened now with the gasoline tax -- shall I call this a strategy of the DPJ? Quite frankly, whether the aim is to bring down the Fukuda Cabinet or drive it to dissolution, they know exactly what they are doing with this strategy. On the other hand, you have earnestly called for discussions, saying that you want to meet for talks, yet, to be honest, we are not sure of when your efforts will be rewarded. Please tell us what you really think about this.

PRIME MINISTER FUKUDA: The situation at present is that the House of Representatives and the House of Councillors take different decisions. This always happens when there is an important decision to be made. It happened over the anti-terrorism special measures law, by which I mean the refueling activities in the Indian Ocean. It happened again with the budgetary discussions in the House of Representatives. And now again, as of today the conclusion of the House of Councillors is different from the one reached by the House of Representatives. This can happen when each of the two Houses have different situations. It can happen, but we need to think about whether or not it is acceptable.

We should not allow the national administration to become stagnant as a result of this sort of thing. We should also consider how the countries around the world would view Japan in this situation.

From the point of view of Japan's diplomacy as well, this is a problem that we most certainly cannot take lightly. I would like the Diet as a whole to consider what is best for the people of Japan, and in the context of resolving the current situation, surely this means that we have to meet for talks. I believe that meeting for talks means searching for the best direction for both sides.

It does not help to create restrictive, categorical policy from the mindset that this policy, and this policy alone, is correct. Nor does it help to create a situation in which we are left at a dead end.

I have been at the head of the current administration for half a year, and I find it extremely regrettable that at such an important juncture the decisions reached have invariably been at odds, and that insufficient talks have been held. I would very much like to break out of this deadlock, and I am firmly resolved to persevere to the utmost to find a way forward.