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

Press Conference by Prime Minister Yasuo Fukuda Concerning the Second Vote on the Revenue Bill

April 30, 2008

[Opening remarks by Prime Minister Yasuo Fukuda]

Exactly one month has passed since the start of the new fiscal year. Although the expenditure budget for the new fiscal year began to be implemented on April 1, I find it profoundly regrettable that, although this is due to the Diet management, two months after the start of deliberations in the House of Councillors, the House, as of today, has yet to determine whether or not they approve, or seek to revise, the revenue bill that ensures the budget implementation.

Under circumstances in which Japan's combined national and local governments' debt stands at 800 trillion yen, we have lost 180 billion yen in revenue in the last month alone. If the current situation persists, national and local finances will continue to be deprived of 6 billion yen in revenue each day. The situation has already begun to result in the freezing of more than 5,000 projects, including road projects in regions around Japan, out of rising concern about revenue shortfalls. Furthermore, local governments across the nation are expressing concern that the situation may adversely affect their capacity to provide services, such as education and welfare, to the people and impact negatively on local economies. I fully understand that there are many who are against the gasoline price increase, given the rising costs of daily goods.

At the same time, people are earnestly calling for efforts to expand social welfare, such as medical care, and countermeasures against the declining birthrate. Given these calls, there arises the question of whether or not it is really acceptable to allow the current situation of revenue shortfalls to continue. As the person who is in overall charge of the nation's finances, and who also bears responsibility for the people's welfare as well as for the state of the local economies, I decided that I had to take a step to resolve the irresponsible situation in which revenue shortfalls are continuing: I decided to put the revenue bill to a second vote, today, in the House of Representatives and enact it into law.

The provisional rate of the gasoline tax will be reinstated tomorrow at the same level as it was prior to its lapse one month ago. As a result, gasoline prices will rise once again. It was a really hard decision for me to have to ask the people to once again bear this burden, when everyone in the nation is scrimping and saving. As we face up to this situation, the Government will, first and foremost, do its best to avoid various kinds of confusion such as may be experienced at distribution points, including gas stations.

Also, we will remain vigilant so as to ensure that attempts are not made to exploit this situation through price gouging. Furthermore, we will pay close attention to the situation and take finely-tuned measures to ensure that no greater burden is placed on small and medium enterprises.

Although the current situation has resulted in the people having to pick up the tab for the political tangle, I have no intention of simply putting the matter to rest as a consequence of the so-called "contorted Diet" situation, in which the ruling coalition commands a majority in the House of Representatives while the opposition parties have control of the House of Councillors. In Diet deliberations thus far, and on other occasions as well, it has come to light that there are wasteful expenditures in the special account for roads, creating a significant amount of suspicion regarding the reliability of the road development plan. Whether we are talking about revenue sources for roads or for other purposes, it goes without saying that we should not waste even one single yen of the taxes entrusted by the people. Regarding the wasteful expenditures in revenue sources for roads, the Government decided to immediately cease any inappropriate outlays, to switch from single tendering procedures to competitive contracting procedures, and to thoroughly eradicate the unnecessarily practice of civil servants obtaining posts in related organizations after retirement from public office. What is most important is to put these decisions into action without fail. Accordingly, we will enhance oversight by a third-party group of learned individuals, and make sure that these measures will result in actual reductions in the budget.

The eradication of wasteful budget items is a premise of all our reforms. We will investigate thoroughly every public sector body, ranging from all the ministries and agencies to independent administrative corporations and public interest corporations with links to the administration, to identify if there are any wasteful expenditures, as part of our efforts to push through reviews aiming at zero waste. I also pledge to you that we will thoroughly implement reform of the civil service system and reform of the public interest corporations, thereby drastically curbing the practice of retired civil servants landing positions in the private sector.

Although there are some extreme views that there is no more need to build roads in our country, we do in fact need to construct roads that are essential for local development, and we do need to support local finances. That said, however, now that we have reexamined the modality of revenue sources for roads and identified problems, I am determined to tackle them straight on. I would now like to take this opportunity to explain to everyone, once again, my honest views on reallocation of revenue sources for roads to the revenues used for general purposes.

At the press conference that I held on March 27, I made my commitment to abolish the system of earmarking revenue sources for roads, to reallocate revenue sources for roads to the revenues used for general purposes from FY2009 on, and to shorten the ten year road plan into a five year plan. Although discussions on these issues are triggered by the question of the modality of revenue sources for roads, they are also matters that affect the very foundation of our country. Our response to the transformation of our social structure with the comprehensive onset of a falling birth rate and an aging society is a pressing issue, as is our response to global environmental problems. In order to respond to the people's call for the enhancement of social welfare and environmental measures, I made a firm decision to thoroughly cut costs in the road development area and in the order of measures vital for the people's lives. My decision is to reallocate revenue sources obtained from these cost reductions to the revenues used for general purposes, and to actively use them as funds for implementing measures for which the people are calling.

The other day, I visited a pediatrics hospital to observe the actual situation in obstetrics and pediatrics services. There, I saw the shortage of pediatricians and the stark reality on the front lines of emergency medical care. What was made clear to me was the necessity of realizing a society in which couples considering starting a family can feel secure about having and raising children. In addition, due to the shortage of doctors--another issue that Japan is facing--the common sense idea that "when we are worried about our health, we can visit a doctor" does not necessarily come to the minds of those people living in the provinces, especially older people.

A variety of problems have been pointed out during the past month regarding the medical care system for people aged 75 and over. Under the new system, 50 percent of medical costs of people aged 75 and over are covered by taxes, with 40 percent coming from the insurance premiums paid by the younger generations and the remaining 10 percent paid by the elderly generation. This system disperses the medical costs of the elderly generation among the entire nation and safeguards health care services for the elderly.

The new system represents an unprecedented large reform and it will take about half a year to complete trial operation of the system for it to be established.

In June, insurance premiums will be withheld from pension payments for the second time. Between now and then, we will intensively monitor the system to identify any problems that may arise in its operation.

We will then implement well-designed measures to address the problems, so that local governments can make the necessary responses.

If financial resources are required to implement those measures, we will set aside funds, first of all, by eliminating administrative waste in accounts such as the special account for roads.

We should not overlook the need to respond to global environmental problems. The effects of climate change are not just somebody else's problem: we have to lead the efforts to tackle these problems by making wider use of the technologies for which the world looks to Japan. In doing so, we must further accelerate and strengthen our efforts to realize a low carbon society by developing innovative solar energy and fuel cells, as well as by increasing, across society, the use of low energy devices.

Apart from the things I have touched on above, a plethora of other issues must be resolved, such as how higher education is to be improved and how education issues are to be addressed.

I believe that the people have a strong wish for the Government to further enhance policies in various areas, beginning with medical care, social welfare, and the environment.

However, in order for the Government to advance such policies, we must secure the necessarily revenue sources. I would like to call on you for your understanding in this respect.

Japan is facing structural changes such as a declining birthrate and an aging population, as well as ones brought about as a result of global environmental problems. Against this backdrop, we will need to advance administration aligned with the perspectives of the people and the consumers. An Agency for Consumer Affairs -- a new government agency, the establishment of which I recently announced -- will advance government policies from the perspective of the consumers. Likewise, uses of revenue sources for roads will be reviewed from the perspective of the people.

When I talk about reallocation of revenue sources for roads to the revenues used for general purposes, I mean precisely the sort of action that demonstrates the change to an administration that acknowledges the leading position of the people.

It is about abolishing the system of earmarking revenue sources for roads, and instead using the revenue sources for various policies sought by the people. In other words, this is a reform to secure revenue sources for the people.

A detailed explanation of these views will be given in the Basic Policies 2009 that we are currently compiling.

We will accelerate discussions in the Council on Economic and Fiscal Policy. The Tax Commission will also launch discussions for fundamental reform of the taxation system earlier than in previous years.

The proposal that I made today on reallocation of revenue sources is a policy decided upon by the Government and the ruling parties. In fact, the Liberal Democratic Party (LDP) and the New Komeito Party, aiming to realize reallocation of revenue sources from FY2009 on, made a decision the day before yesterday to immediately establish a ruling parties' consultation council, to finalize a bill to conduct necessary legislative revisions by the end of this year, and to submit it to the Diet for its enactment.

Going forward, I will make every effort to ensure the enactment of the special bill concerning revenue sources for roads, which is currently the subject of deliberations in the House of Councillors.

This bill is the foundation for the disbursement of 700 billion yen of subsidies to local governments. In order to resume projects that had been frozen and underpin local economies, we must pass this bill as soon as possible. Some members of the opposition parties point out that this bill contradicts the policy of reallocation of revenue sources, but I am absolutely determined to realize reallocation from FY2009 on in line with the policy of the ruling parties.

If the opposition parties truly desire to realize reallocation of revenue sources for roads to the revenues used for general purposes, they who control the House of Councillors can take a responsible approach. I would like to take this opportunity to call on all Diet members who care about the future of our country, and intend to act responsibility regardless of which political parties they belong to, and ask them for their cooperation in this regard.

In closing, I would like to ask for the people's understanding and cooperation for the efforts that I am making now to realize reallocation -- a reform conducted from the perspective of the people.

Thank you for your attention.


Question 1: The Democratic Party of Japan (DPJ) is putting forth the position that today's second vote to reinstate the provisional tax rate goes against the people's will.

The LDP's official candidate lost by a wide margin the other day in the by-election for the House of Representatives in the second district in Yamaguchi Prefecture. There are increasing calls asserting that, given the current situation, it would be appropriate to dissolve the Diet and ask the people for their views. In your mind, is dissolution of the House of Representatives an option?

PRIME MINISTER FUKUDA: Currently, I am not considering dissolving the Diet. I do not think that dissolution of the Diet is something that should be considered every time there is an issue that comes up. I think that dissolution of the Diet is something that needs to be considered and decided from a comprehensive standpoint. I do not think we are now at that point in time.

Question 2: The provisional tax rate lapsed for a period of one month, and gasoline prices temporarily fell. Now prices are going to rise sharply, which has created a significant level of confusion in the people's lives. Looking back on the events that have taken place in the past month, what do you think is your responsibility as the Prime Minister for this situation?

PRIME MINISTER FUKUDA: We must think about why this situation happened. In the end, I think that this was really a matter that boiled down to a problem of Diet deliberations. The opposition parties refused to respond to Diet deliberations in the House of Councillors and they still have not put forth a conclusion in this regard. As a result, I had no choice but to make the decision that I did. It was during that ongoing process that a law governing the gasoline tax expired.

Regarding the Diet, the chairs of both Houses decided to adopt the revised bill on gasoline by the end of March after conducting sufficient discussions on the bill. We believed that such rules should be respected. But looking back on it now, we were perhaps a little too complacent.

Furthermore, we still have not received a response from the opposition parties for the proposal that I made on reallocation of revenue sources, which is something for which the opposition parties are calling.

Even though such circumstances did prevail, we caused the people unnecessary concern, as well as trouble. We caused those people in local governments great concern regarding revenue sources. This did not have a good effect on the prevailing economic conditions. In fact, I think it only had a negative influence, creating a problematic situation for the regions.

Furthermore, unnecessary troubles were imposed upon suppliers, including retailers and gas stations. I do feel that I bear responsibility for the disturbances to the lives of all those people involved.

Question 3: I would like to ask about reallocation of revenue sources. First of all, I would like to ask about the way this will be done. When do you think would be the right timing for a Cabinet decision to take place? Is it correct to think that the bill will be submitted to the Diet by the end of this year, during its extraordinary session?

Almost all of the members of the opposition parties are, as you said, in support of reallocation of revenue sources, only they disagree about the extra portion of the provisional tax rate, making it difficult for both parties to negotiate their positions. Will you wipe the slate clean in discussing whether or not to maintain, when reallocating revenue sources, the current level of the provisional tax rate?

PRIME MINISTER FUKUDA: Are you referring to the extra portion for the current fiscal year?

Question:No, I am talking about going forward from FY2009 on.

PRIME MINISTER FUKUDA: I have repeatedly made it clear, and in fact, there is an agreement that has already been decided between the Government and the ruling parties on this matter: We will abolish the system of earmarking revenue sources for roads in FY2009 after implementing fundamental reform in the fall of FY2008. This policy will remain unchanged and I intend to steadily take concrete actions to press forward in that direction and stay the course for that policy. It is not so long until we start discussions for the compilation of the Basic Policies in June, and naturally the policy of reallocation will be incorporated into the Basic Policies. A Cabinet decision will be made prior to that. We are preparing to make the Cabinet decision sometime next week or around May 12.

Once the Basic Policies have been decided upon, discussions on the taxation system will start. Naturally, the Council on Economic and Fiscal Policy will need to accelerate their discussions on this issue. At the same time, the Tax Commission will commence their preparatory work for the discussions on an environment tax, among other issues. Then, fall will come.

Question 4: The opposition parties have decided to postpone the submission of a motion censuring the Prime Minister this time, but how would you respond in the event that the motion was proposed and adopted next month in the House of Councillors? Are you entertaining the possibility of dissolving the House of Representatives and holding general elections, or a general resignation of the Cabinet?

PRIME MINISTER FUKUDA: I have no intention right now of speaking about hypothetical things that might happen in the future. I believe we still have sufficient time, and therefore, I am hoping that the opposition parties might agree with our proposal. Our proposal is not very different from what the opposition parties have in mind. As such, I think that as politicians they need to take a response in a manner that will not result in unnecessary confusion. I am not giving any particular thought to what might happen beyond that.

Question 5: This relates to a previous question. You have identified the idea of reallocating revenue sources for roads to the sources used for general purposes, but what are your thoughts on the collection of taxes? Will you maintain the idea of a provisional tax rate? Just now, you spoke about an environment tax. Please, can you tell me whether or not you are giving any thought to introducing something like an environment tax?

PRIME MINISTER FUKUDA: Before we decide whether or not to maintain the provisional rate of the gasoline tax, we must fully discuss, as we carry out a fundamental reform of the taxation system, whether or not a tax on gasoline is really what is appropriate. There is no country in the world in which the tax rate on gasoline is falling, and in some countries the rates are increasing. In consideration of this fact as well as our efforts to address environmental issues, I think it is appropriate to maintain at least the same level of provisional tax rate as now. However, anything beyond that will be subject to discussions when the fundamental reform of the taxation system is conducted.

Question: So you are saying that the current level will be maintained, and above and beyond that, consideration will be given to how the tax is collected?

PRIME MINISTER FUKUDA: I am not sure what you mean by that.

Question: I am asking whether your intention is to maintain the current level of the tax, but to give various considerations to the specific tax items.

PRIME MINISTER FUKUDA: Let me reiterate this point: the system of earmarking revenue sources for roads will be abolished. Every one of the revenue sources will be reallocated to the revenues used for general purposes. We must certainly give some consideration to what item that will be designated under, but this is a matter to be discussed at the time of the abolishment of the system.

Question 6: Earlier you mentioned your policy to conduct a comprehensive monitoring of the medical care system for people aged 75 and over. Is there any possibility, in your view, that depending on the monitoring results there will be a change in the system that would require a revision of law? Or, will the response be limited to operational improvements, such as an extension of the current measures aimed at alleviating the significant changes?

PRIME MINISTER FUKUDA: Unfortunately, I cannot give you a clear answer at this stage. However, I do believe that there is not necessarily anything wrong with the fundamental structure and concept of the system. What we need to think about is the way to maintain our long life society. Indeed, Japan has the highest mean age of any country in the world, and thus is experiencing a situation that is not witnessed in any other country. It was in such circumstances that after many years of consideration of the most appropriate structure that the current system was finally conceptualized, and therefore I do not think there is anything wrong with the basic concept of the system.

That is why we need to identify what must be done to establish the system, to identify problems urgently, and to thoroughly monitor the system's actual operation, which we will do as soon as possible.

Any matters related to the system will be discussed once the monitoring is completed, but as I said earlier, I absolutely see nothing wrong with the core structure, and it is from that perspective that I would like to ask for the monitoring to be undertaken. Once the monitoring results are made available, I would like the situation to be carefully considered.