(Provisional Translation)

On the Specific Contents of the "Front-Loaded Reform Program"

Summary of the remarks by Prime Minister Junichiro Koizumi at
the Cabinet Meeting of September 14, 2001

Ｉ announced at a recent cabinet meeting to formulate an "Front-Loaded Reform Program" for the vigorous and speedy implementation of structural reform. I indicated at the time that this Program would focus on the following:

Taking into account the further deliberations, including those at the Council on Economic and Fiscal Policy, I have drawn up the principal elements of the following three aspects of the Front-Loaded Reform Program as presented in the materials before you.

[1] Institutional reform and environmental improvement for the purpose of generating new industries, challengers, and employment

[2] Measures for strengthening safety nets relating to employment and small and medium-sized companies

[3] Highly urgent measures for accelerating structural reforms

I once again call upon your cooperation in formulating this Program.



On the Specific Contents of the "Front-Loaded Reform Program"

Prime Minister's Directive September 14, 2001



1. Basic Principles

 Based on the "Structural Reform of the Japanese Economy: Basic Policies for Macroeconomic Management," (Cabinet decision of June 26, 2001), the government is committed to formulating a "Reform Schedule" outlining the sequence of structural reform initiatives, including medium-term measures. The Reform Schedule will contain certain initiatives which must be formulated and implemented in advance of the general body of reform. These initiatives, including those measures to be included in the supplementary budget, will be brought into the Front-Loaded Reform Program.

The Front-Loaded Reform Program shall actively contain measures for regulatory reform and other forms of institutional reform. Measures requiring the implementation of a supplementary budget shall target two specific objectives following a rigorous review of fiscal revenues and expenditures: (1) Measures for strengthening the safety nets relating to employment and small and medium-sized companies. (2) Highly urgent measures with a direct linkage to structural reforms. The Front-Loaded Reform Program shall exclude simple demand-increasing measures, including such public works projects, and shall focus on measures which can be expected to generate prompt and tangible results in job creation and the revitalization of private-sector economic activities. In line with the commitment to the reform of public corporations, no new additional outlays shall be made to public corporations, with the exception of such cases where it is absolutely unavoidable.

2. Principal Elements

(1) Institutional reform and environmental improvement for the purpose of generating new industries, challengers, and employment

a. Active promotion of regulatory reform

Active measures shall be taken to abolish regulations as much as possible in order to revitalize the economy and to develop consumer- and people-oriented social and economic structures. Particular attention shall be given to regulatory reform in the IT-related fields and people-related services.

Regulations shall be eliminated as much as possible to promote competition and innovation so as to revitalize the economy and to develop consumer- and people-oriented social and economic structures. Particular attention shall be given to rigorously implementing regulatory reform in IT-related fields and such "people-oriented service fields" as medical services, welfare and childcare, human resources, education, the environment, and urban rejuvenation where reform has remained relatively behind. For this purpose, a maximum effort shall be made to observe "Interim Summarization concerning Six Priority Areas" of the Council for Regulatory Reform and to implement its recommendations ahead of schedule.

i) In IT-related fields, regulatory reform shall be carried out, for example, in the following areas:
・ Promoting the use of under-utilized optical fiber networks
・ Facilitating the installation of optical fibers in multi-unit housing
・ Preparing legislation for establishment of rules of responsibility for Internet service providers and others

ii) In "people-oriented service fields," the following measures, for example, shall be implemented to promote appropriate responses to changes in employment conditions and to accelerate structural reforms in areas of particular interest to the public. Additionally, bold measures for regulatory reform shall be taken in a fashion not bound by traditional institutional frameworks.

○Medical services
・ Promoting the use of information technologies, including electronic medical services billing
・ Expanding private-sector participation in the examination of medical services billing
・ Expanding the parallel use of insured and uninsured medical services
・ Reviewing regulations pertaining to the management of medical institutions

○Welfare and childcare
・ Lifting the ban on corporate management of care houses and other facilities
・ Promoting private-sector participation in the management of childcare facilities
・ Promoting the diversification of childcare services

○Human resources (labor)
・ Accelerating the revision of the Worker Dispatch Law
・ Fundamentally easing regulations pertaining to employment agencies
・ Reviewing management of the temporary job-placement system with a view to permanent employment

○Education
・ Establishing standards of accreditation for private elementary and junior high schools
・ Developing new types of elementary and junior high schools

○Environment
・ Establishing measures for soil detoxification in urban areas and other areas

○Urban rejuvenation
・ Further disclosing real estate related information
・ Promoting the circulation of second-hand housing
・ Facilitating the rebuilding of multi-unit housing

b. Structural reform of securities markets and financial system

Securities markets shall be further developed to enable the general public to participate with ease. The problem of non-performing loans shall be normalized within three years at the latest.

i) Structural reform of securities markets
In line with the transition from preferential treatment of savings to preferential treatment of investment, highly transparent securities markets shall be developed to enable the general public to participate in these markets with ease. For this purpose, whatever measures feasible shall be promptly implemented in such areas as infrastructure improvement for enhancing public confidence in the markets and systemic measures, including tax reform.

ii) Resolution of the problem of non-performing loans
Inspections of major banks shall be fundamentally upgraded in order to gain an accurate grasp of the status of non-performing loans (NPLs). The frequency of comprehensive inspections shall be increased from once every other year to once every year, with follow-up inspections conducted every six months. With enhancement of functions of the Resolution and Collection Corporation (RCC) and under various frameworks including the voluntary liquidation guidelines to be formulated soon, the final resolution of NPLs shall be definitely carried out within two years for existing NPLs, and within three years for new NPLs. Simultaneously, structural reforms shall be promoted in other areas so as to achieve a normalization of the NPL problem within three years at the latest.

(2) Measures for strengthening safety nets relating to employment and small and medium-sized enterprises

a. Employment measures

Efforts shall be made to create new job opportunities. At the same time, the following measures shall be implemented to further strengthen safety nets relating to employment: utilization of private-sector initiative to improve job-placement functions; strengthening of job training and capacity building for displaced middle-aged and older white collar workers; substantial extension of period of unemployment benefit payments with job training; review of support measures for employers; and establishment of funding for public-sector employment (jobs in new types of public services).

With the unemployment rate exceeding 5%, the situation in labor markets is becoming increasingly severe. In view of this fact, in addition to the implementation of institutional reforms and environmental improvements outlined under (1) above for the creation of new employment, efforts shall be made to further strengthen employment-related safety nets.

i) In view of increased unemployment due to mismatching in the labor markets, private-sector initiative shall be utilized to improve job-placement functions. For this purpose, measures shall be taken to enable private employment and placement agencies to develop finely tuned placement functions tailored to the needs of individual job seekers. Integrated employment support systems shall be strengthened covering the full range of activities from filing of job applications to consulting, training programs, placement services, and recruitment.

ii) While allowing for maximum individual choice, all education and training resources, such as private education and training institutions, universities, and private employers, shall be utilized to strengthen job training and capacity building programs which are especially effective for displaced middle-aged and older white collar workers.

iii) Systems for unemployment benefit payments with job training shall be substantially extended to support reemployment efforts. Support measures for employers shall be reviewed to promote job creation in new growth areas.

iv) In order to cope with employment problems during a period of intensive adjustment (forthcoming period of 2 to 3 years), funding shall be established for the creation of emergency and temporary employment (jobs in new types of public services) in the public sector (including private businesses and NPOs). Such jobs shall target middle-aged and older unemployed persons and persons not receiving unemployment insurance benefits, and shall include the following: teachers' assistants at schools, support personnel for police force, and forestry workers for environmental preservation.


b. Measures for small and medium-sized enterprises

Support shall be provided for the establishment and business innovation of small and medium-sized enterprises. Safety net mechanisms, including the implementation of financial measures, shall be further strengthened to prevent chain-reaction bankruptcies of small and medium-sized enterprises.

In conjunction with the progress of structural reform, support shall be provided for the establishment and business innovation of highly motivated small and medium-sized enterprises with outstanding potential. Appropriate steps shall be taken in conjunction with such support to avoid moral hazards. To prevent chain-reaction bankruptcies and to support business innovation among such highly motivated and promising small and medium-sized enterprises, safety net mechanisms shall be further strengthened, including the creation of new financial measures and facilities for small and medium-sized enterprises.

(3) Highly urgent measures for accelerating structural reforms

The process of structural reform shall be accelerated by implementing measures designed to enhance the convenience of the public, promote human resources development, and empower individuals and businesses to realize their full potential.

In line with the basic principles outlined in 1. above, highly urgent measures shall be implemented for accelerating the process of structural reform. The following specific measures shall be considered for the purpose of enhancing the convenience of the public, promoting human resources development in line with the advance of the IT revolution, and empowering women and other individuals and private businesses to realize their full potential. Measures requiring budgetary outlays shall be promoted as an integral part of institutional reforms and environmental improvements.

a. Realization of electronic government
b. Promotion of information infrastructure in schools (development of school LAN systems, etc.)
c. Promoting of zero waiting-list for nursery schools (increasing the number of openings by 150,000 by fiscal 2004), and development of after-school childcare systems (15,000 facilities by fiscal 2004)
d. Urgent improvement of waste disposal facilities (control of dioxin emissions, etc.)
e. Innovation and the creation of new industries for revitalizing local economies based on the promotion of local science and technology through the cooperation among industry, universities and government.
f. Promoting PFI contributing to urban rejuvenation, urban development, and improvement of public facilities

It is hoped that monetary policies will continue to be appropriately managed in support of the process of structural reform.