Speeches and Statements by Prime Minister Junichiro Koizumi

Prime Minister Koizumi's Remarks on the Cabinet Decision on the "Basic Policies for Economic and Fiscal Policy Management and Structural Reform 2002" in response to the report by the Council on Economic and Fiscal Policy (CEFP)

June 25, 2002

The Koizumi Cabinet has advanced wide ranging structural reforms, starting from the "Basic Policies for Macroeconomic Management and Structural Reform of the Japanese Economy" (Cabinet decision of June 26, 2001), while taking appropriate and flexible policy measures to deal with the economy and employment, including the adoption of the "Front-Loaded Reform Program" and the "Immediate Action Program for Structural Reform." Furthermore, "Structural Reform and Medium-Term Economic and Fiscal Perspectives" was adopted in January 2002, indicating the economy and society which Japan is aiming for, as well as a clear future outlook for achieving this through economic and fiscal management based on a steady growth driven by demand in the private sector, and an efficient and sustainable fiscal structure.

As a result of these approaches, although the employment and income conditions remain in a difficult state, the Japanese economy has entered the bottom stage in its cyclical changes, reflecting the rapid economic recovery in the United States and Asia and the progress in inventory adjustments.

Based on the achievements so far, in order to make the trend towards economic and fiscal improvement even more solid and to build a sound economy and society so that the people can have confidence in the future, there is a need to move on to a new stage. The newly announced "Basic Policies for Economic and Fiscal Policy Management and Structural Reform 2002" clarify the second stage of reform, and should be considered as "Basic Policies No. 2"

Under "Basic Policies No. 2":

First, we will advance the "Economic Revitalization Strategies," which include the establishment of "special structural reform areas."

Second, we will implement a comprehensive and fundamental tax reform with utmost emphasis on restoring the vitality of the Japanese economy. With a view to ensuring that the tax system is "broad, light and simple," consideration will be given to the structural burden of income tax, inhabitant tax and corporate tax.

Third, we will accelerate the reform of government expenditures to realize "a small government of high quality worthy of the burden required."

By advancing these in trinity, we will realize steady private demand-driven economic growth over the medium-term.

Furthermore, the Government and the Bank of Japan will jointly take vigorous and comprehensive measures including the implementation of the basic policies at an earliest stage, in order to overcome deflation, which is the top priority item for economic management in the next year or two.
In addition, with a view to establishing a vitalized financial system that can support an invigorated economy and ascertaining a clear outlook for the future of the financial sector, we intend to swiftly compile a medium-term vision.

We are about to enter the second stage of reform. The time has come for government and the private sector to join together to steer a course through the difficult waters that we must traverse so that we can ensure the achievement of our goals.

In this I would like to sincerely ask for the understanding and cooperation of the people of Japan.