(Provisional Translation)

Statement by Prime Minister Junichiro Koizumi Concerning the Basic Policies for Economic and Fiscal Management and Structural Reform 2003 (Cabinet Decision)

June 27, 2003 Since its inauguration, the Koizumi Cabinet has steadily worked toward the implementation of structural reforms under the principles of "no growth without reforms," "areas that can be achieved by the private sector should be privatized" and "decisions that can be made at the local level should be made by local governments." Although the structural reforms have achieved some results toward the economic revitalization of Japan, they are in mid-stream, as there are still many issues left to be tackled seriously. Based on the principles set out in the previous two editions of the Basic Policies as well as the examination and assessment of results of the reforms to date, in addition to the current economic and fiscal situation, I have clarified the following targets to be pursued: "revitalization of the economy"; "ensuring the security of the people"; and "establishment of responsible fiscal balances for future generations." To this end, the Government has decided to further strengthen structural reforms in the following seven areas: (i) Regulatory Reform and Special Structural Reform Zones; (ii) Flow of Funds and Financial and Industrial Revitalization; (iii) Tax Reform; (iv) Employment and Human Resource Strategy; (v) Reform of the Social Security System; (vi) Reform of Central and Local Governments"; and (vii) Reform of Budget Formulating process. In particular, the Government has formulated a broad framework for the "Three Major Policies " as a part of the "Reform of Central and Local governments," and has resolved to take new steps in regulatory reform. Furthermore, regarding the budget, new measures will be taken, including the introduction of a trial "model project" starting from FY2004 budget to establish a budget formulating process in line with the principle of "plan-do-see." Overcoming deflation is a significant issue posed to the Japanese economy. For this reason, the Government will accelerate reforms focused on structural reforms that promote the expansion of private demand and employment, and will vigorously implement effective and comprehensive measures with the Bank of Japan in an integrated manner. The Government will also take bold and flexible policy, according to the economic condition. The only viable path for achieving sustained economic growth, rather than temporary economic growth and long-term economic expansion is, I believe, to promote structural reform and to realize a "revitalized Japanese economy" by improving the nature of the Japanese economy. I firmly resolve to continue to steadily promote structural reforms toward the economic revitalization of Japan pursuant to the "Basic Policies 2003." I would sincerely ask for understanding and cooperation of the people of Japan.