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(Provisional Translation) New Year's Reflection by Prime Minister Junichiro Koizumi January 1, 2005

A Happy New Year to you all. Since the birth of the Koizumi Cabinet I have made every effort to promote structural reforms, under the basic policy that "without structural reforms there will be no rebirth or growth in Japan." I have also pushed ahead with reforms of "leave to the private sector what it can do" and "leave to the localities what they can do," and we are now seeing the "buds of reform" beginning to sprout. We are now entering a crucial time of whether we can nurture these "buds of reform" into a "large tree". Together with the people of Japan I will advance reforms with firm resolve. I would like to sincerely offer my sympathy and concern to all of the people who were affected by the natural disasters - earthquakes, typhoons and torrential rains alike - that assaulted Japan last year. While working towards the swift recovery and reconstruction of the regions affected by natural disasters, I will work towards the improvement of Japan's disaster prevention measures to ensure that ours is a country that is good at withstanding the forces of nature with which we are faced. Economic conditions vary from region to region in Japan and there are still regions in severe situation, but despite some weak movements in economic activities, we are seeing a continued recovery led by the private sector. I will continue to accelerate reforms in the area of finance, tax system, regulations and expenditure, work to normalize the issue of non-performing loans and make efforts to overcome deflation, thus realizing a vigorous economy. In the budget for FY2005, in addition to advancing expenditure reform without exceptions, I will further promote the "three-part reform package," that reviews at once issues of reduction in state subsidies, the transfer of tax sources to local governments and reform in local allocation taxes, under the policy of "leaving to the localities what they can do". Bills on the privatization of the postal services will also be submitted to the regular session of the Diet this year, and Japan Post will be privatized in April 2007. At the end of last year the Government of Japan decided to extend by one year humanitarian and reconstruction assistance activities being undertaken by the Self-Defense Forces in Iraq. The safety and prosperity of Japan is dependent on peace and stability in the international community. In cooperation with the international community, Japan will continue to make efforts towards reconstruction and achievement of stability in Iraq. In relations with North Korea, Japan will engage in tenacious negotiations under a policy of "dialogue and pressure" through international coordination, in order to resolve the abduction, nuclear and missile issues in a comprehensive manner. Japan's foreign policy will, as every year, be conducted on our own initiative, with Japan's national interests at heart, based on the two pillars of the "Japan-US alliance" and "international coordination." What is most important for Japan's development is a spirit of self-reliance and self-discipline. This year, I will continue to push forward with structural reforms, in order to build a society in which each and every person can make full use of their own wisdom and motivation. I ask for the understanding and support of the people of Japan in these endeavors. I hope that each and every one of you will have a wonderful, fruitful and fulfilling year in 2005.