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1. Introduction
Citizens of Japan, members of the Diet, I am Naoto Kan. Four months have passed since I took up leadership of the administration in June; in September, I was reelected president of the Democratic Party of Japan, and I reshuffled my Cabinet and the party's posts. Now we have entered the phase of launching the new administration in earnest. This is the point of departure for my "true-to-its-word Cabinet." What deeds will we seek to achieve? In a word, these will be the important policy agendas that have been postponed so far. There is a deepening sense that society is caught in an impasse: Economic stagnation has gone on for twenty years, the unemployment rate is on the rise, the numbers of suicides and solitary deaths are increasing, and measures to counter the falling birthrate and the aging of society have been slow in coming. We are not at the stage of asking which of Japan's past administrations bear responsibility for the present state of Japanese society, trapped in this feeling of impasse. We must move now to tackle those important policy agendas that have been put off, achieving solutions rather than handing down the problems to the next generation. This resolution of mine is what informs the "true to its word" aspect of the Cabinet. There are five important policy agendas that require solutions: These are, firstly, three areas to be tackled in an integrated manner - achieving economic growth, putting public finances on a sound footing and reforming social security - along with advancing reforms of regional sovereignty and implementing active diplomacy in which the people of Japan all play a part. Today I will present my thinking on these five agendas.
2. Achieving Economic Growth: Economic Measures and Promotion of the New Growth Strategy
(Building the Nation Through Growth and Employment)
The first issue is economic growth. Domestic consumption is currently afflicted by severe conditions. Faced with insufficient demand, no matter how much the supply side works to reduce costs, it will only end up being involved in price competition, prompting still more deflation. The economy cannot recover in this situation. We must bring about a shift from supplier-based standards and view things from the perspective of the consumer. Today, when consumption and investment lack vigor, it is employment that will drive the gears of the economy. The government will take the lead in boosting employment. This will take place in the areas of medical care, nursing care, services related to childrearing, and the environment. There is still work to be done in areas with high demand. We will increase employment by targeting these areas. This will lead to reductions in the Japanese people's worries about employment and in deflationary pressure. Consumption will be stimulated and incomes will increase. As a result, demand will recover and the economy will regain its vitality, thus creating more jobs. As unemployment and unstable forms of employment decline, social stability will increase through approaches including the "New Public Commons" measures, and all people will be able to feel that they have "places to belong" and "roles to play." We will forcefully promote this sort of nation-building, with its focus on growth and employment, via the newly established Council on the Realization of the New Growth Strategy.
(First Phase: Urgent Responses to the Appreciation of the Yen and Deflationary Conditions)
Toward these ends, we will first work from now toward the next fiscal year to promote an uninterrupted string of economic measures with focus on growth and employment, taking a "three-phase approach." We have already moved to implement the first of these phases, our urgent measures to address the rapid appreciation of the yen and deflationary conditions. The Government and the Bank of Japan carried out intervention in the foreign exchange markets. We will take decisive measures as needed in the future as well. We will also execute a supplementary expenditure of some 920 billion yen with its focus on immediately effective employment-boosting measures. We will direct particular effort toward the employment of new graduates. We will roll out a nationwide system to provide one-stop employment services, reducing the burden on both the people searching for work and the businesses employing them. Furthermore, measures to protect existing jobs by funding new business locations for low-carbon industries and measures to create new jobs in Japan's regional economies have been included. We expect the Bank of Japan to continue working closely with the Government and to implement further measures as needed to break the economy free from deflation.
(Second Phase: Flexible Measures in Response to Future Developments)
Next, to break free from deflation and place the economy back onto a growth track, we will enter the second phase, the compilation of a supplementary budget in this extraordinary session of the Diet. The content of this budget will be vital. Drawing on proposals from the opposition, we have outlined a framework composed of five main pillars. The first of these is employment and human-resource training. Second is the promotion of the New Growth Strategy. Third is support for child-rearing, healthcare, nursing care and welfare. Fourth is revitalization of Japan's regions, construction of new social infrastructure and measures to support small and medium-sized enterprises. And fifth is our efforts to reform Japan's regulations and systems. For instance, with a view to increasing use of renewable energy, we will seek to facilitate the introduction of "total buyback systems," in addition to relaxing regulations related to facilities for large-scale solar power generation, new energy sources, and reduced energy consumption. In order to make Japan a global destination for medical exchange activities, we will improve the handling of visas and statuses of residence. In addition, we will move swiftly via the newly established round table council to craft measures that promote construction of new facilities in Japan with high employment-creation potential. All of these are agendas with direct bearing on the lives of the Japanese people. We will move forward with exchanges of views among the ruling and opposition parties, aiming to reach agreement on matters including the supplemental budget.
(Third Phase: Full-Fledged Implementation of the New Growth Strategy)
The third phase of our approach is the compilation of the budget for the next fiscal year, work on which has already begun, and the reform of tax systems. In crafting the budget, we will make use of the "special funding to bring vigor back to Japan," bolstering the creation of demand and employment. With respect to corporate taxation, we will simplify the tax code and prepare a revision plan by the end of the calendar year from the perspective of bringing burdens in line with those in other countries. In the manufacturing and service industries, it will be important to create fresh demand across all industrial categories, bringing about the sort of innovation that allows the realization of bountiful lifestyles with peace of mind. In this connection we will also boost efforts in the areas of research and development, as well as human resource training.
Let me say this one more time: The most important issue for this extraordinary session of the Diet will be the second phase, the passing of a supplementary budget encompassing economic measures. I truly look forward to constructive consultations among the ruling and opposition parties. And I also hope to move without interruption on to the third phase, putting the Japanese economy firmly back on the growth track by implementing the New Growth Strategy ahead of schedule. I ask for your understanding and your cooperation in these matters.
3. Putting Finances on a Sound Footing and Cutting Governmental Waste
(Implementing the Fiscal Management Strategy)
The second important policy agenda that needs to be addressed is putting our nation's finances on a sound footing. Our fiscal situation will become unsustainable at some point in time if the current trend continues without change. In June we formulated a Fiscal Management Strategy that indicates the path to restoring fiscal health. The strategy is to halve the primary deficit as a percentage of GDP by fiscal 2015 from fiscal 2010 levels and to achieve a primary surplus by fiscal 2020. These are ambitious goals, but we will seek to achieve them one step at a time, while at the same time also seeking economic growth and expansion of employment.
(Formulating the Fiscal 2011 Budget)
Our first step will be to create a budget for fiscal 2011 that thoroughly eliminates wasteful spending. Last year, we secured about \2 trillion in fiscal resources by screening 449 government programs. And we will continue to make every effort to reduce waste. Wasteful spending is unacceptable regardless of the state of government finances. We will undertake a broad review of government programs, such as by expanding the scope of the screenings to include special accounts. We will continue to make a sincere effort to fulfill the campaign pledges contained in the DPJ's "Manifesto 2010." In cases where budgetary constraints make it difficult to implement policies as originally stated in our manifesto, I will seek to come up with measures, including how and to whom benefits are to be provided, that are acceptable to the Japanese people by candidly explaining to them the situation.
(Promoting Administrative and Civil Servant Reform)
Our aim in reviewing government expenditures is not simply to implement cuts. What is important, rather, is to provide government services from the users' perspective and to create systems to provide those services more efficiently. This is also an aim that underlies the reform of the civil servant system. We are engaged in an integrated effort to carry out this reform, which includes a 20 percent reduction in overall personnel costs related to national civil servants. We are also streamlining the structures and staff of each government ministry, including the elimination or merger of ministerial branch offices. I would like to again call on our nation's civil servants to give priority to their duties as administrative professionals.
4. Reforming Social Security
(The Need for Reform)
The third important policy issue is to reform the social security system. Without a reliable system of social security, people will continue to harbor a sense of anxiety about the future. Such anxiety has contributed to sluggish consumer spending and a stagnant economy. Reforms must be implemented quickly. There are two different approaches to such reform. One gives priority to providing security for all, even if it means shouldering a somewhat large burden; and the other is to reduce that burden as much as possible and leave security to the discretion of the individual. My view is that it is preferable to have a reliable social system, even if it means shouldering a slightly heavier burden.
We will begin by carrying out discussions on how to optimize our social security system. We will need to ensure that our pension system and medical, nursing care, and welfare services are adequate. Because of the graying of the Japanese population, expenditures on social security will increase by over 1 trillion yen per year even if the current level of services is maintained. New needs are expected to arise, however. We will need, for instance, to protect the elderly from social isolation, protect women from breast and cervical cancer, protect children from poverty and abuse, and protect everyone from the risks of suicide and disasters. Instead of promoting survival of the fittest, we will have to address these issues and protect those who are vulnerable. It will also be necessary to decide how a number system for social security and taxation can be introduced to serve as the backbone of the social security system. Piecemeal responses will not lead to fundamental solutions. The government intends to present the Japanese people with choices that are easy to understand regarding the overall reform of our social security system, including the level and content of services that are thought to be needed.
(Debate between Ruling and Opposition Parties)
In presenting choices to the public, it will also be necessary to discuss in an integrated way the question of how to secure necessary resources to finance the social security system. I would like to pursue debate on our overall system of taxation, including the consumption tax. When we do reach a conclusion, and before its implementation, we will ask the people whether or not they endorse our ideas. This policy remains unchanged. Naturally, this debate will need to transcend ruling and opposition party differences. In order to carry out such broad debate, I would like to set up a forum for members of the government and the ruling parties to examine social security reforms as a whole, and I hope to invite members of the opposition parties to join this forum and exchange ideas with them.
(Enhancing Support for Children and Child-rearing)
Support for children and child-rearing remains a top priority. Children are treasured resources upon which the future of our country depends. Responsibility for raising them with care must be borne not just by parents but also by local communities and the nation as a whole. We are steadily implementing an effort to make tuition effectively free at senior high schools, and also expanding the child allowance in a way that achieves a balance between cash benefits and government expenditures on facilities like day-care centers. We are preparing a bill for submission to the ordinary session of the Diet next year that will include a measure to merge day-care centers and nursery schools. The size of the labor force has begun to contract as a result of the low birthrate and graying of the population. We are promoting gender equality and supporting working mothers by expediting the effort to reducing waiting times for placing children in day-care facilities.
5. Advancing Reforms of Regional Sovereignty
The key to solving the three important policy agendas that I have outlined is to promote reforms that will lead to greater regional sovereignty. Our generation should pave the way for local communities to play a leading role in fostering their own distinctive industries and providing social services that truly meet the needs of their residents. Unfortunately, however, the changes implemented up to now have not brought about tangible changes. In order to break this impasse, we will introduce a system of block grants in lieu of the categorical subsidies that are offered today. In the fiscal 2011 budget, we are securing funds that go beyond the framework of each government ministry and revising the system of local grants in a way that allows for a greater degree of freedom. I would like to see local governments devise their own development models, rather than being tied down to the concepts issued by the national government. In late August each government ministry submitted its conclusions regarding the examination of transferring some of the administrative work and authority of ministerial branch offices. But the ministries' proposals were inadequate, so I instructed them to take another look. I will then issue guidelines on cross-sectional transfers and aim to be finished with our review within the year.
6. Implementing Active Diplomacy to Open Up the Country and Build the Future
(Diplomacy at a Watershed Moment in History)
The fifth important policy agenda to be addressed is implementing active diplomacy. The international community today faces major changes in such areas as national security and the economy that could be regarded as a watershed moment in history. With the rise of the emerging economies, we are seeing shifts in the world's power relations. Japan must be on its guard in the light of the uncertainties and instabilities that exist in the region around us. In this international climate, how can Japan - dependent on the outside world for our natural resources, energy, and markets - secure peace and prosperity? Reacting passively will not be enough. All of our citizens need to regard this as a problem that affects them directly, and we need to work together as a nation to develop an active foreign policy. In doing this, we need to be bold enough to open up the country and incorporate the vitality of the rest of the world; at the same time, it is essential that we take the lead in contributing to solutions to the global issues facing the international community. In reassessing our National Defense Program Guidelines, we will draw up a plan within the year that is appropriate to our forthcoming situation in order to maintain a truly able and effective defensive capability.
(The Japan-US Alliance)
The Japan-US alliance is the cornerstone of Japan's foreign and national security policy. In my meeting with President Barack Obama recently, we confirmed again that the Japan-US alliance represents a shared resource for the stability and prosperity not just of the Asia-Pacific region but also of the world and that we would work to deepen the alliance in a form appropriate to the twenty-first century, and further that we would develop the alliance around the three pillars of security, the economy, and cultural and people-to-people exchanges. We agreed that Japan and the United States must work together to tackle the issues facing the international community, such as support for Afghanistan and Pakistan, Iran's nuclear weapons program, climate change, and nuclear disarmament and non-proliferation. We will work to develop concrete policies for further deepening the alliance at the Japan-US summit meeting scheduled to take place during the APEC meeting in November. On the issue of relocating the US Marine Corps Air Station Futenma, we will proceed according to the Japan-US agreement reached in May this year, at the same time working to reduce the burden currently borne disproportionately by Okinawa. I will explain the situation sincerely to the people of Okinawa, and ask for their understanding.
(Relations with China)
As neighboring countries separated by a thin strip of water, Japan and China are of great importance to each another. It is acknowledged that relations between the two countries are of critical importance to the Asia-Pacific region and, I might say, the entire world. In recent years, China's rise to prominence has been impressive indeed. However, we have concerns regarding the recent build-up of China's defensive capabilities, which lacks transparency, as well as China's increasingly ambitious maritime activities in an area stretching from the Indian Ocean to the East China Sea. The Senkaku Islands are an integral part of Japanese territory, recognized as such by history and by international law. No territorial dispute exists. In dealing with the recent events, Japan acted dispassionately and in accordance with Japanese law. We hope and expect that China will speak and act in a manner befitting its role as a responsible member of the international community. Both countries need to proceed with calm as we respond to the various issues that could arise between us. In terms of the relationship between Japan and China as a whole, it is essential that we work together to deepen our mutually beneficial relationship based on common strategic interests from a broad perspective, including peace and prosperity in the Asia-Pacific region and increasing cooperation in the economic field.
(Toward Stability and Prosperity in East Asia)
This autumn, important international meetings will take place in Japan. At the tenth meeting of the Conference of the Parties (COP10) to the Convention on Biological Diversity, Japan will perform an important role as host country and chair. Further, at the 18th APEC Economic Leaders' Meeting, which I will chair, Japan will work together with the United States, the Republic of Korea, China, ASEAN countries, Australia, Russia, and other countries to build a better environment for shared growth and prosperity for the countries of the Asia-Pacific region. Economic partnership agreements (EPAs) and free trade agreements (FTAs) will be important bridges in this regard. As part of this, we will look into participating in such negotiations as those for the Trans-Pacific Partnership agreement and will aim to build a Free Trade Area of the Asia-Pacific. With a view toward making the East Asian Community a reality, I want to open our country to the outside world and move forward with concrete steps of negotiations as much as possible.
On North Korea, Japan seeks to normalize relations based on the Japan-DPRK Pyongyang Declaration, through a comprehensive solution of the various outstanding issues of concern with North Korea, including the abduction, nuclear, and missile issues, and a settlement of the unfortunate past. With regard to the abduction issue, we will do our utmost as a matter of national responsibility, in order to bring all the victims back to Japan as soon as possible. We will continue to watch political developments in North Korea closely.
7. Political Reform and Reductions in the Number of Diet Members
I want to say a word about the makeup of our National Diet as we face up to the issues I have spoken of. Clean politics that does not require a great deal of money is both the strong desire of the Japanese people and the starting point of all my political activities. The Democratic Party of Japan will carry out thoroughgoing debate within the party on the issue of banning political donations by corporations and groups, and on the possibility of reducing the number of Diet members. We will decide on a general policy by the end of the year, to be finalized following consultations with members the opposition parties.
8. Conclusion
The National Diet was convened today. Can the members of the Diet cooperate in finding solutions to the problems facing Japan today and fulfill the responsibilities we cannot postpone to the next generation? Will we be able to meet the expectations of the Japanese people? This session of the Diet will be a critical test. Members will be asked to deliberate on important legislation, including a postal reform bill, a bill for a basic law on climate change countermeasures, and a bill for revising the Labor Services Temporary Assignment Law. It is my hope that this session will be a "Policy Diet" capable of drafting concrete measures. For this to happen, I will work to make this a "Deliberation Diet" in order to deepen debate. I want this to be a Diet capable of reaching conclusions. Those of us called to this place should not be separated by where we sit. I will do my best to explain the Government's position to members of the opposition parties and will always be open to sincere and honest debate with all those who are willing to think seriously about the future of the country. I will do everything in my power to find room for agreement. The members of the Diet, elected by the people, must devote themselves to building the politics of this nation. Let us work together to build a politics in which sovereignty truly lies with the people.
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