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Speeches and Statements by Prime Minister Junichiro Koizumi

(Provisional Translation)

Opening Statement by Prime Minister Junichiro Koizumi
at the Press Conference on the Passage of the FY2003 Budget

28 March 2003

Prime Minister Koizumi speaks at the press conferene

The FY2003 budget has just been approved by the Diet. This is the result of the joint cooperation of the ruling parties; the Liberal Democratic Party, New Komeito and New Conservative Party. I would like to extend my deepest gratitude for their efforts.

As we were in discussions of the budget today, we heard one piece of happy news. Japan's first information gathering satellite was successfully launched from Tanegashima island. Although it will take some time before we know if this information gathering satellite is fully functioning, we will probably know for sure on March 31 if the launch has been a complete success. Anyway, the most difficult step of launching the satellite has been completed successfully and we can expect that Japan's information gathering capabilities would be enhanced from now.

Aiming towards the implementation of the budget for FY 2003 in April, without formulating a provisional budget, now we have prepared an environment whereby the budget can be implemented seamlessly with the supplementary budget for fiscal 2002. I am confident that the system for overcoming deflation and achieving economic revitalization is in place.

Now looking at the employment figures for February, although it can be seen that they have improved somewhat, a severe situation still prevails. This budget incorporates employment measures, and measures for small and medium enterprises (SMEs), ensuring effective remedies in these areas. Employment measures include the extension of the period of unemployment benefit payments, and the training for those who look for new jobs to enhance their capability.

With regard to measures for SMEs, budget has been allocated to secure support for SMEs that are suffering under funding problems. There have already been many applications for such support from February to March, amounting to around 700 billion yen, and budget is allotted to deal with new demands as well.

I have been taking solid measures this and next fiscal year towards the goals that I have laid out since my appointment as Prime Minister. For example, in order to reduce wasteful budget spending, I have conducted an expenditure review that was as stringent as possible. For this fiscal years' budget I have often heard voices saying that the budget is an austerity budget, given the current poor economic conditions, or that the Government needs to take more economic measures through increasing public spending, and issuing more government bonds. However, in the circumstances in which tax revenues amount to a mere 42 trillion yen, we have approved the issue of government bonds totaling 36 trillion yen. I do not believe that criticism of an austerity policy is valid. We have undertaken to review wasteful expenditure as much as possible in order to severely revise and reduce the budget compared to the previous fiscal year, resulting in figures that are almost a decrease from the previous year. We have given priority to two areas, however; social security and science and technology, whose budget have grown.

With regard to issues such as pensions and medical care, given that Japan is moving towards an aging society coupled with a declining birth rate, it is necessary to develop a sustainable social security system so that these issues do not cause concern for many of the people of Japan. The science and technology budget is a key to striking the balance between requirements from both the environment and the economy; it is to achieve environmental protection and economic revitalization simultaneously. With the help of specialists including Nobel Prize winners, this is a cross cutting budget that spans across all ministries with increases made to respond to the necessary priority areas. In particular, the "Zero Garbage" strategy is of vital importance in the creation of a recycling society from now. Currently, the process that began with my appointment as Prime Minister of using only low emissions vehicles for use by government organizations and changing all such vehicles to low emissions vehicles within three years is progressing steadily. Fuel Cells are also part of this.

In 2005 Japan will establish the world's most stringent emissions gas standards for diesel vehicles and measures are already underway. Although to date there has been debate that a focus on environmental protection would have a negative impact on economic development, I believe the opposite, namely that through environmental protection a new kind of economic development can be achieved. We must live in coexistence with nature. I will continue to prioritize the environmental protection and economic revitalization.

Furthermore, now that we are in the era of gender equality, since my appointment as Prime Minister I have allocated a substantial budget in this area, based upon the recognition that we must take effective measures for mothers having a hard time bringing up children. What is the most difficult problem for mothers? Mothers with children go to work and there is no one who would look after their children. I have allotted budget for a "zero wait listed children strategy" for nurseries as it is estimated that over the course of three years there is a lack of 150,000 places for children.

Moreover, when we consider there might be sleeping resources that exist in Japan, it would be wise to consider the many sleeping tourist resources that exist in the cities and local areas of Japan. This is the idea behind our policy of trying to attract more foreigners to come to Japan, both to cities and local areas. In 1987 approximately five million people made overseas trips from Japan. At that time there was a movement to double the number of people going overseas to 10 million. The aim was to achieve this figure of 10 million people in five years. In reality, in less than five years the figure had exceeded 10 million and last year more than 16 million Japanese made trips abroad.

On the other hand, how many foreigners come to Japan? Currently only about five million visit Japan each year. We should now reverse the goal that was set in 1987 and aim to double the number of visitors to Japan from five million to ten million. All regions of Japan should give more publicity to tourism. For this target, relevant ministries should closely work together.

Moreover, we want to see more foreign companies invest in Japan. For this Japan needs to make itself an attractive market for foreign capital. Recently, with foreign companies investing in Japan or engaging in corporate buy-outs, talk of caution has emerged among some people. I thought such talk must stop. When we look at the situation in other developed countries, the level of investment by and entry of foreign companies is 20 or 30 times the level of such entry and investment into Japan. Despite this, when foreign companies enter Japan or buy out Japanese companies caution against them emerges. This must not be. If foreign companies enter Japan then they will stimulate Japanese companies. The people of Japan, rather than viewing foreign companies as a threat, should welcome them as with their entry and investment they will bring services or products that did not exist previously in Japan, and shake up Japanese management. Cautious attitudes need to be replaced by welcoming ones.

Through measures of doubling of tourist numbers to Japan, as well as making the Japanese market attractive for foreign companies or inviting foreign companies into Japan with the aim of doubling their number, I believe that there will be a positive effect on the Japanese economy. Japanese management will be given a stimulus and Japanese consumers will be provided with various products that previously have not been available in Japan. It is also likely that such movements will lead to the development of Japanese companies and also to the revitalization of the Japanese economy. I will now make every effort to promote this policy and work towards its implementation.

Of course, regarding administrative and fiscal reforms in which, since my appointment, I have made efforts with a view to avoid the wasteful spending of taxes, reform of postal services, fiscal investment and loan reform, and reform of special public institutions are all being steadily implemented. Furthermore, although there will be no panacea for economic revival, we must continue to dispose of non-performing loans, rebuild the soundness of financial institutions, and engage in financial reform. Also, with regard to tax reform, the relevant bills were approved today thanks to all, and will take effect from April 1. Tax breaks for capital investment and research and development, and inheritance tax and gift tax cuts will be implemented in April and will be retroactive to January.

Many people are talking only about the tax increases on alcohol and tobacco, but the increase in tax on alcohol, low-malt beer and tobacco will amount to 10 yen on a can of low-malt beer and 1 yen on each cigarette. These tax increases will provide a total of 200 billion yen in revenue. However, the total tax reduction will come to two trillion yen. Although the tax reductions are not being reported a great deal and the 200 billion yen tax increase is being reported incessantly, the reality is that there will be a two trillion yen tax reduction and in total there is 1.8 trillion yen in advance tax reductions. We will implement this tax reform over several fiscal years.

We have started to discuss the tax system January last year. This year too we must continue to ceaselessly engage in tax reform, and therefore discussions are already underway, having begun in January.

Decentralization will also be of importance next year. Therefore we try to see results of the reform on the trinity of subsidies, allocation taxes and the transfer of tax and financial resources to local governments. These are issues on which we must continue to make progress.

Moreover, in regard to regulatory issues, if regulatory reform is difficult to implement nationally, we will implement it in the special zones. For example, joint stock companies or NPOs are unable to establish schools. Regions want to harness their local characteristics more. In the case of Gunma Prefecture they want to have English-only lessons throughout elementary and junior high schools. We will reform the regulations to allow these initiatives through creation of special zones and regulatory reform.

The same applies to home-brewed sake called Doburoku. We will get rid of the regulations prohibiting farmers from producing home-brewed sake at lodges and inns at a quantity of under 3,000 1.8-liter bottles. If it pleases customers, and if Iwate Prefecture communities and local bodies say they want farmers to make home-brewed sake, then why shouldn't we allow it? The Government will permit it in special zones. We must continue this kind of regulatory reform, as well as the further revision of expenditures, tirelessly. By pursuing this kind of reform, I want to achieve economic revitalization.

Now, in relation to reform of postal businesses, the Japan Postal Corporation will start on April 1. This will also mark the beginning of private sector participation in the postal business. I hope that the Japan Postal Corporation will provide a small parcel service and a range of other services with a quality comparable or even superior to those provided by the private sector. Then, business accounting will be introduced. Mr Ikuta, a private sector business leader has been appointed President. I am sure that this is effectively the first step towards voluntary privatization. The Japan Postal Corporation will be a public corporation and I would like it to be an exemplary public corporation. I want it to become a public corporation in no way inferior to the private sector, an outstanding public corporation which in the future, just as when the Nippon Telegraph and Telephone Corporation became NTT, the Government will be able to sell its shares for a good price in making it a private company, contributing to the national treasury. This will all begin on April 1.

The same goes for the highway-related public corporations. At the time of my inauguration, people said privatization would be completely impossible. The opposition to privatization has since largely dried up. Preparing for privatization is underway.

The Promotion Committee for the Privatization of the Four Highway-Related Public Corporations has recommended cost-cutting, and its preparation is in prgress. Allow me to give one specific example. Back in the days of the highway-related public corporations, emergency telephones on expressways cost as much as 2.5 million yen each. There are 22,000 of them! How, we asked, could an emergency telephone cost 2.5 million yen? Was there not a better, easier way? It is now possible to install an emergency telephone for 400,000 yen. These will be placed in 6,800 locations this year. We are saying that instead of wasting 2.5 million yen on installing an emergency telephone, if you can get one for 400,000 yen, then do it that way. Cost-cutting is proceeding steadily. In this respect, structural reform is moving along well.

Iraq and a host of other foreign policy issues are before us. We are also facing a host of difficult problems in respect to domestic economic revitalization. I know that the duty of the Prime Minister is very tough, with no time to rest and relax, day in, day out. Every day with a solid mindset as if I were going out in the battlefield, I intend to strive to fulfill my responsibilities as Prime Minister, and in this I ask for your continued cooperation and support. Thank you.