[Title] Speech on Fiscal Policy by Minister of Finance Suzuki at the 213th Session of the National Diet
Before requesting deliberation on the budget for FY2024, I would like to state the basic approach underlying the government’s fiscal policies and outline the draft budget.
First, I would like to offer my deepest condolences to the victims of the 2024 Noto Peninsular Earthquake that took place on January 1 and their bereaved families. I would also like to express my sympathy to all people affected by the disaster. The government has so far made all-out efforts to search, rescue and support people affected by the earthquake. We will continue to make every possible effort to ensure the recovery and reconstruction of the disaster-affected areas, including steady implementation of the package of measures to support the daily lives and the livelihoods of the disaster victims.
(Current state of the Japanese economy and basic approach to fiscal policies)
The Japanese economy is showing positive trends, such as the highest wage increase in 30 years last year and companies’ ambitious investment plans.
Under these circumstances, it is important to realize sustainable, structural wage increases and sustainable economic growth led by private-sector demand while dealing with the ongoing price hikes. To this end, we will promptly and appropriately implement the recently enacted supplementary budget for FY2023. At the same time, it is necessary to steadily implement the budget for FY2024, which has been complied in unison with the supplementary budget, and the FY2024 tax reform.
Fiscal management is becoming increasingly difficult because of the series of supplementary budgets compiled in relation to the responses to the events such as COVID-19 and price hikes. As public finances are the cornerstone of the nation’s credibility, it is necessary to secure confidence in medium to long term fiscal sustainability by striving to achieve fiscal soundness under the policy line that the economy is the foundation of public finance.
We will continue to steadily promote reforms in both expenditure and revenue to achieve the target of a primary balance surplus in FY2025, as stated in the Basic Policy on Economic and Fiscal Management and Reform 2023 and other policies, and further normalize the expenditure structure.
(Outline of the budget and the tax reforms for FY2024)
Next, I would like to explain the FY2024 budget and tax reform outline.
The FY2024 budget is intended to take on the challenges which come with the times and which cannot be postponed, and seize the change at a time when we are facing a historic turning point.
Specifically, the FY2024 budget appropriately deals with the structural challenges that confront Japan, such as promoting efforts to realize wage increases that keep pace with rising prices, including improvements in treatment for people working on the frontlines of healthcare and welfare services, promptly implementing an acceleration plan based on the Children’s Future Strategy, and steadily strengthening defense capabilities in light of the severe security environment surrounding us.
In addition, in order to realize a virtuous circle of prices and wages, reserve funds totaling one trillion yen to finance countermeasures against crude oil price increases and rising inflation will be set aside as a secure safeguard so that flexible actions, including the development of an environment conducive to wage increases, can be taken in the event of unexpected shortages of expenditure necessary for countermeasures against price hikes.
In addition, as a response to the 2024 Noto Peninsula Earthquake, general reserve funds totaling 1 trillion yen, an increase of 500 billion yen compared with the initial budget for the previous fiscal year, will be set aside in order to ensure that seamless and flexible actions will be taken according to the stages of recovery and reconstruction in FY2024.
At the same time, based on the government guidelines, including the Basic Policy on Economic and Fiscal Management and Reform 2023, the FY2024 budget limits the real growth of social security-related expenditures to the extent owing to the aging of society and also effectively maintains the existing spending reform initiatives with respect to items other than social security-related expenditures.
The general expenditures will be totaled approximately 67.78 trillion yen. The total amount of the general account, including approximately 17.79 trillion yen in local allocation tax grants, and approximately 27.01 trillion yen in government bond expenditures, will be approximately 112.57 trillion yen, a decrease of approximately 1.81 trillion yen from the initial budget for the previous fiscal year.
On the other hand, the government’s income from taxes and other revenues is expected to be 69.61 trillion yen, and other revenues are expected to be approximately 7.51 trillion yen. Government bonds issuance will be approximately 35.45 trillion yen, a reduction of approximately 170 billion yen from the initial budget for the previous fiscal year.
Next, I would like to explain major expenses.
Concerning social security-related expenses, we will secure expenses necessary for quickly implementing policy measures based on the Children’s Future Strategy, such as radically expanding the child allowance, and also improve the treatment of workers on the frontlines of social security services through the revision of medical fees, long-term care fees, and disability welfare service fees. On the other hand, as a result of various reform efforts, including the revision of drug prices reflecting market prices, we have limited the real growth of social security-related expenses to the extent owing to the aging of society, as I mentioned earlier.
Regarding education and science promotion expenses, we will take necessary measures to promote a subject-based teacher assignments for late elementary grades. Furthermore, from the perspective of becoming a nation built on science and medicine, we will strategically promote research and development in important fields, such as AI and quantum computing, and enhance support for basic research and young researchers.
As for local government finances, we plan to ensure that the total amount of local government general funds will be appropriately secured while maintaining the soundness of local government finances, for example by reducing the issuance of local government’s temporary fiscal stimulus bonds.
Regarding national defense expenditures, amid the severe security environment, we will steadily promote the strengthening of defense capabilities based on the Defense Buildup Program and continue to secure financial resources to maintain Japan’s defense capabilities in a stable manner.
Concerning public works-related expenditures, we will promote disaster prevention and mitigation and national land resilience through the implementation that integrate software and hardware. We will also focus on infrastructure development and other measures to improve sustainable productivity.
As for expenditures on economic assistance, we will secure an official development assistance (ODA) budget necessary for responding effectively to the current global situation while strategically implementing the Free and Open Indo-Pacific initiative and other initiatives amid the severe international situation.
Regarding measures for small and medium-sized enterprises (SMEs), we will address current management challenges faced by SMEs through measures such as the fair subcontracting transactions and support for business revitalization and succession.
For energy measure expenses, we will issue GX Economy Transition Bonds in the special account budget for energy measures and support the private sector’s GX investments, which are necessary for achieving the carbon neutrality target.
Regarding the agriculture, forestry, and fisheries budget, in order to enhance food security, we will promote the production of field crops through the conversion of paddy fields into upland fields. We will also engage in activities such as the promotion of developing sales channels for the diversification of export destination countries for agriculture, forestry and fishery products, the strengthening of bases of production for the sustainable growth of the forestry and fishery industries, and resource management.
Concerning the reconstruction from the Great East Japan Earthquake, we will precisely respond to the needs according to the stage of reconstruction during the Second Reconstruction and Revitalization Period. In addition, to achieve creative reconstruction, the special account budget for Reconstruction from the Great East Japan Earthquake for FY2024 will be set at approximately 630 billion yen.
As for the Fiscal Investment and Loan Program for FY2024, the total amount will be approximately 13.34 trillion yen. This expenditure will cover the investments in critical fields essential for strengthening Japan’s growth potential and overseas investments and loans intended to help adapt to changes in the international environment.
Concerning the Japanese government bond management policy, the total issuance amount of JGBs for FY2024, including refunding bonds, remains at an extremely elevated level of about 182 trillion yen. We will continue to issue JGBs stably based on close dialogue with market participants while taking into consideration market trends.
As for the FY2024 tax reforms, from the viewpoint of mitigating the burden of price hikes outpacing wage increases on the people and realizing an economy in which wage increases exceed the price hikes in a sustainable manner, the income tax reduction will be implemented and the tax system for incentivizing wage increases will be enhanced. Furthermore, in order to strengthen supply capacity through the promotion of capital accumulation and productivity improvement, the tax system to promote domestic production in strategic fields and the innovation box tax program will be created so that a startup ecosystem can be dramatically strengthened and the platform taxation will be introduced in light of the globalization.
(Conclusion)
This concludes my explanation of the basic concept of fiscal policy, and the outline of FY2024 budget and tax reforms.
Now that we are facing a historic turning point, we need to take a bird’s eye view of the present era, looking at it from the viewpoint of future generations, and consider which way Japan should go. As the future is an extension of the present, the choices that we make now will set a future course. We must address the challenges that cannot be postponed. At the same time, rebuild the Japanese economy, make efforts to achieve fiscal soundness and leave a hopeful society to future generations.
For this reason, it is necessary to enact 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 parliamentarians with respect to our fiscal policies.