[Title] Speech on Fiscal Policy by Minister of Finance Suzuki at the 211th Session of the National Diet

As we begin deliberations on the FY2023 budget, I would like to state my beliefs regarding the basic approach to fiscal policy and provide a general budget outline.

(Current state of the Japanese economy and basic approach to fiscal policies)

The Japanese economy continues to pick up moderately as socioeconomic activities continue to normalize from the COVID-19 pandemic. On the other hand, the environment surrounding the Japanese economy is becoming increasingly severe, with concerns of a global recession due to soaring energy and food prices worldwide and monetary tightening in Europe and the U.S., among other factors.

Against this backdrop, we must put the Japanese economy on a sustainable growth path led by private demand while overcoming the current high prices. We believe it is necessary to quickly and appropriately execute the second supplementary budget for FY2022 that has just been approved, as well as to steadily implement the FY2023 budget and the FY2023 tax reform, which were compiled in tandem with the supplementary budget.

Japan's fiscal situation has become unprecedentedly severe due to the response to the COVID-19 pandemic and the compilation of a series of supplementary budgets. We believe that finances are the cornerstone of national confidence and that it is essential to secure fiscal reserves on a regular basis to ensure that Japan's credibility and the lives of its citizens are not damaged even in the event of an emergency. In promoting responsible economic and fiscal management, it is important to strike a balance between economic revitalization and fiscal soundness, in line with the policy that fiscal management must be based on the economy. We will continue to steadily promote spending and revenue reforms to achieve a surplus in the primary balance in FY2025, as stated in the Basic Policy on Economic and Fiscal Management and Reform 2022 and other guidelines.

(Outline of the budget and the tax reforms for FY2023)

Next, I would like to explain the FY2023 budget and tax reform outline.

The FY2023 budget is designed to pave the way for solving important domestic and international issues facing Japan at this turning point in its history and to pave the way for the future.

Specifically, it is necessary to drastically strengthen Japan's defense capabilities under the newly formulated National Security Strategy and to secure financial resources to back up these efforts. It is necessary to strengthen support for children and child-rearing, with the newly established Children and Families Agency as the command post, which will be established in April this year. It is also necessary to create a mechanism to support private investment through growth-oriented carbon pricing toward realizing green transformation (GX). In addition, we are facing the important issues of the moment head-on and setting certain paths forward, such as accelerating the digital implementation of local governments under the Digital Rural City-State Concept and supporting initiatives that contribute to regional development.

Furthermore, a reserve fund for COVID-19 and oil price and price hikes of four trillion yen and a reserve fund for emergency economic response to the situation in Ukraine of one trillion yen will be provided. With these measures, we will continue to take all possible measures to prepare for unexpected changes, such as the spread of COVID-19 infections, price hikes, and concerns about a global economic recession.

At the same time, based on the government guidelines, including the Basic Policy on Economic and Fiscal Management and Reform 2022, we will achieve the policy of limiting the real growth of social security-related expenditures to the extent owing to the aging of society. At the same time, concerning non-social security-related expenditures, we will take flexible measures based on economic and price trends while achieving an increase in defense-related expenditures. Through these measures, we are substantially continuing our past spending reform efforts.

General expenditures totaled approximately 72.73 trillion yen. The total amount of the general account, including approximately 16.4 trillion yen in local allocation tax subsidies and approximately 25.25 trillion yen in government bond expenditures, is approximately 114.38 trillion yen.

On the other hand, the government's income from taxes and other revenues is expected to be 69.44 trillion yen, and other revenues are expected to be approximately 9.32 trillion yen. Japan's public debt is approximately 35.62 trillion yen, a reduction of approximately 1.3 trillion yen from the initial budget of the previous fiscal year.

Next, I would like to explain the government's major expenses.

Concerning social security-related expenses, we secured necessary expenses for enhancing the government's child-related policy, such as an increase in the lump-sum allowance for childbirth and child-rearing and continued implementation of the subsidy for supporting childbirth and child-rearing. At the same time, we made various reform efforts, including revisions to annual drug prices covered by the National Health Insurance program, to reduce the burden on the public. As a result, as I mentioned earlier, we have achieved our policy of limiting the real growth of social security-related expenditures to the extent owing to the aging of society.

Regarding education and science promotion expenses, we will take necessary measures to promote a subject-teacher system in upper elementary school grades while rationalizing the fixed number of teachers and staff. Furthermore, from the perspective of a science and technology nation, we will strategically promote research and development of important advanced technologies such as the quantum and AI fields. In addition, we will enhance support for basic research and young researchers.

As for local government finances, we will reduce the issuance amount of temporary fiscal stimulus bonds and increase the amount of debt redemption in the special account for tax allocation and distribution of concessionary taxes. We plan to ensure that the total amount of local general funds will be appropriately secured while maintaining the soundness of local government finances.

Regarding national defense expenditures, we will fundamentally strengthen defense capabilities based on the newly formulated National Security Strategy. We will focus on priority areas, such as Japan's standoff defense capability, integrated air and missile defense systems, and facility maintenance. At the same time, we will secure financial resources to maintain Japan's defense formidability.

Concerning public works-related expenditures, comprehensive efforts will contribute to disaster prevention and mitigation and make the national land more resilient. Our plan includes measures to combat aging infrastructure using new technologies and watershed flood control safeguards that integrate hardware and software. In addition, we will also focus on infrastructure development and other measures to improve the nation's productivity.

As for economic cooperation costs, we will strengthen our efforts, including the free and open Indo-Pacific initiative, in view of the G7 Hiroshima Summit and other events in these drastically uncertain international circumstances. We will secure an official development assistance (ODA) budget that can respond firmly to the current global situation.

Regarding measures for small and medium-sized enterprises (SMEs), we will strengthen our price pass-on initiative. In addition, we will address current issues surrounding SMEs, such as productivity improvements and support for business revitalization and succession.

For energy measure expenses, we will issue bonds backed by future financial resources from carbon pricing in the special account for energy measures. We are committed to supporting the private sector's GX investment and appreciate its necessity in achieving our carbon neutrality goals.

Regarding the agriculture, forestry and fisheries budget, we will take measures such as the conversion of land to farmland to strengthen food security. In addition, the government will expand exports of agricultural, forestry and fishery products and promote the sustainable growth of the forestry industry through appropriate resource management. Furthermore, we will take measures to stabilize the operations of those who manage fishery resources.

Concerning recovery from the Great East Japan Earthquake, we will precisely respond to the needs of each stage of recovery during the Second Reconstruction and Revitalization Period. In addition, to achieve creative reconstruction through efforts such as establishing the Fukushima Institute for Research, Education and Innovation, the special account for Reconstruction from the Great East Japan Earthquake for FY2023 is set at approximately 730 billion yen.

As for the Fiscal Investment and Loan Program for FY2023, we will continue to take all possible measures to provide financial support to businesses in difficult circumstances due to the effects of soaring prices and the COVID-19. Ultimately, the total amount to address the acceleration of the new capitalism and to respond to changes in the diplomatic and security environment is approximately 16.27 trillion yen.

Regarding the government debt management policy, the total amount of government bond issuance, including refunding bonds, remains at an extremely high level of approximately 206 trillion yen. In this context, we will continue to strive for stable Japanese government bond (JGB) issuance based on close dialogue with the market.

For the 2023 tax reform, the Nippon Individual Savings Account (NISA) will be fundamentally expanded and made permanent to actively shift household assets from savings to investments and double people's asset income. At the same time, we will take tax measures to strengthen the startup ecosystem fundamentally. In addition, to achieve a fairer and more neutral tax system, we will introduce measures to require a minimum burden on extremely high levels of income and a global minimum tax. In addition, we will establish a neutral tax system by selecting the timing of asset transfers.

(Conclusion)

This concludes my explanation of the basic fiscal policy, the budget for FY2023, and the tax reform outline.

Our actions and choices will profoundly impact the lives of future generations, not only today but for generations to come. We are living at a turning point in history. It is our responsibility to solve the many difficult problems that postwar Japan has faced and left behind and to firmly hand over a prosperous Japanese society to the next generation by rebuilding the Japanese economy and working to restore fiscal soundness.

Therefore, it is necessary to pass this budget and related bills as soon as possible.

I hereby request that the Diet deliberate on the budget and promptly give its approval. I also sincerely ask for the understanding and cooperation of all the people of Japan and my fellow Diet members concerning our fiscal policies.