[Title] Policy Speech by Prime Minister Shinzo Abe to the 166th Session of the Diet

(Introduction)

When I assumed the office of the Prime Minister in September last year, I laid out to the people of Japan the vision that the Abe Administration will pursue: "a beautiful country, Japan." A country which is full of vitality, opportunity and compassion; a country which cherishes the spirit of self-discipline; a country which is open to the world; so that it is admired and respected by people all over the world, and our children's generation can possess self-confidence and pride. In order to realize this new vision of Japan, I believe it will be essential to work with the Japanese people and produce results one by one with a sense of speed. I pledge to continue my utmost efforts towards Japan's bright future.

I would like to make Japan a country that will serve as a new role model in the international community of the 21st century.

In order to realize this, we must not be content with the brilliant post-war Japanese success model, which our predecessors started and built from the ruins of the war. It has become obvious that many of the basic frameworks, starting from the Constitution, down to the administrative system, education, economy, employment, state-local relationship, foreign policy and national security, have become incapable of adapting to the great changes taking place in the 21st century. Various changes that we are facing now could hardly be imagined at the time that I grew up, when a television, a refrigerator and a washing machine were valued as the "Three Sacred Treasures."

Now the time has come to boldly review these post-war regimes all the way back to their origins, and set sail on a new course. In order to realize "a beautiful country, Japan," my mission is none other than to draw a new vision of a nation which can withstand the raging waves for the next 50 to 100 years to come.

Based on the stable foundation of the coalition government by the Liberal Democratic Party and the New Komeito Party, I am determined to carry out all the policies directed towards "the creation of a beautiful country." Let me explain how we are going to proceed in concrete terms, by articulating the basic policies of the Abe Administration for conducting the affairs of the state.

(Strengthening Growth Potential)

To achieve my vision of "a beautiful country," an economy full of vitality is indispensable as its foundation. As Japan has become a society with a declining population, it is essential to increase productivity and strengthen growth potential so that our people have dreams and hopes for the future, and to maintain a social security system which provides the basis for more secure lives. Now is the time to elevate the Japanese economy to a new stage for economic growth over the medium and long term, and toward that end, we have formulated the "Direction and Strategy for the Japanese Economy," which lays out the reform goals that we will pursue during the next five years. Under my leadership, we will strongly advance a new growth strategy under this policy so that the people can truly sense for themselves that we are achieving real growth. This will be realized through innovation which brings about cutting-edge technologies, products and services, and an open approach which brings the vitality of Asia and the world into our country.

Approximately 100 years ago, a respected physics scholar declared that it is impossible for a machine, which is heavier than air, to fly. Only eight years later, the Wright Brothers succeeded with the first manned flight. Constant innovation opens the way to infinite future possibilities for mankind and provides great momentum for growth. By May, we will draw up "Innovation 25," a long-term strategic guideline spanning through the year 2025, and we will implement concrete policies, such as strategic assistance for developing medicines with dramatic effects for cancer and Alzheimer's disease, and efforts to unify the various patent systems of different countries around the world.

Coupled with innovation, we will strengthen the international competitiveness of the ICT (Information and Communications Technology) industry, and we will put together a Productivity Acceleration Program around April aimed at reforming remaining regulations in promising sectors for the future, such as the medical and agricultural fields, as well as to promote greater efficiency in business through full utilization of information technology. We will promote greater investment by undertaking, for the first time in nearly 40 years, radical revision of the tax system as it applies to asset depreciation.

In order to achieve sustainable growth in the 21st century, it is indispensable to bring Asian and global growth and vitality into Japan. Toward our goal of welcoming as many as 10 million foreign visitors in 2010, we will strive to have more than five million people travel back and forth between Japan and China (People's Republic of China) this year. We will work for an early realization of 24-hour operation of international airports in the major metropolitan areas, and of our plan to double the amount of foreign investment into Japan. By May, we will put together the "Asia Gateway Initiative," which envisions Japan acting as a bridge between Asia and the world in the flow of people, goods, money, culture and information, and thereby achieving growth together. As part of this Initiative, we will also formulate "The Japanese Cultural Industry Strategy," which will enhance the competitiveness of areas that represent the good traits and uniqueness of Japan, such as animated film, music and Japanese food, and present them to the world.

Strengthening economic partnership will bring great benefits by expanding the markets of all countries involved, and will also contribute to domestic reforms. We will strive for an early conclusion of Economic Partnership Agreements with the ASEAN and other countries, and of an investment agreement amongst Japan, China and South Korea (Republic of Korea), as well as for an early conclusion of the WTO Doha Round negotiations.

(Creating a Society Full of Opportunities That Guarantees a Chance to Challenge Again and Again)

It is vital that each and every person feel pride, meaningfulness, self-fulfillment, and hope for tomorrow in one's daily life. Economic growth should aim at this. We intend to focus our efforts on improving "quality of work" and "quality of life," paying heed to the individual natures and values of Japanese people.

I have been particularly stressing the importance of creating a society in which there is no stratification into winners and losers, and creating a society in which ways of working, learning, and living are diverse and multi-tracked; in other words, a society full of opportunities where everyone has a chance to challenge again and again. We will do our best based on "The Comprehensive Plan for Challenge Again Assistance Measures," which was recently formulated, so that people with a challenging spirit, including people in various circumstances and difficulties, can eagerly take on new challenges for employment or education.

In concrete terms, we will provide new assistance for employment and vocational training for older "freeters" (job-hopping part-timers) who were not able to become full-time employees when employment trends were at a crawl. We will also strive to secure employment opportunities for young people by such measures as review of the current system of employing new graduates en masse. By revising the law on part-time work, part-timers will be able to obtain equitable treatment with full-time employees according to their jobs, and we will also promote efforts to enable part-timers to evolve into full-time employees. We will expand social security coverage so that part-time workers will be able to receive benefits in the future as eligible members of the employee pension scheme. We will make necessary revisions to the minimum wage system so that it functions fully as a safety net, with a view to improving the situation for workers in difficult economic situations. We will also provide assistance for securing employment which nurtures the eagerness to work based on the idea of encouraging self-reliance.

It is also important to provide people who have retired from the front lines of the workforce with a place where they can begin a new life with pride. We will expand opportunities for elderly people and retired baby-boomers by providing assistance to reemployment of experienced workers and to employment initiatives in the agricultural, forestry, and fisheries industries; and by providing opportunities to work for supplying technical assistance to developing countries.

The activities of women are a new source of vitality for our nation. We will actively promote a harmony between work and family life by reviewing ways of working and doubling the number of teleworkers, so that women with the eagerness and capability to work can take up new challenges in all sectors and be active with high hopes for the future. For those who seek early reemployment while raising children, we will expand the employment assistance provided by offices of reemployment agency, Mothers' Hello Work. We will provide thorough care and assistance for self-reliance of women in difficult situations, such as victims of domestic violence or single mothers.

In applying of the Law to Assist Self-Reliance of Disabled Persons, we will take necessary measures by reducing the burden in response to their various needs. We will also offer preferential tax treatment to charity for private companies and other organizations which give assistance to the disabled, the elderly, women, and others who are taking up new challenges.

(Creating Attractive Regions)

A nation will not be vitalized unless its regions are vitalized. I believe we must abandon the approach that has been taken since World War II, one in which the central government plans what regions should do and forces them to do it.

In order to draw the motivation, wisdom, and ingenuity of regions, it is essential to develop a system that enables regions to explore ideas and execute them, for it is the regions that best know the needs of their people. We will advance the decentralization of power from central government to local governments in every way possible. With a goal of submitting to the Diet a new package of bills for decentralization within the next three years, we will review the division of roles between the central and local governments as well as the degree of the central government involvement. What is more, we will proceed with the combined review of local-allocation taxes, subsidies, and allocation of tax sources. At the same time, we will strive to minimize the disparities in financial strength among local governments. We will deepen our discussion and continue our investigation into the system of a broader regional government (doshu-sei).

In April we will initiate the "Program for Helping Striving Regions to Help Themselves" so that regions can promote their independent projects and be reborn as appealing regions. We will provide assistance in the form of local-allocation taxes to local governments which develop independent projects such as branding local products, promoting the regions as attractive locations for business, or supporting child-raising, and implement them with clean measurement of their achievement.

We will support companies with forward-looking employment practices, focusing on regions that are experiencing particularly harsh employment situations.

We will endeavor to vitalize the shopping areas of local cities and promote region-wide efforts to build communities that are comfortable and best sized to live in and that are full of life and friendly to the elderly and the disabled.

Agriculture, a major industry for the regions, has a vast potential as a strategic industry for the new century. We will aim to centralize and prioritize policy measures for those who possess the ability and motivation. We will strive to raise the scale of exports of "delicious and safe Japanese food products" to one trillion yen by 2013. We will also work to vitalize agricultural, forestry, and fishery villages by such measures as promoting exchanges between urban and rural areas.

In Kumano, a small town in Hiroshima Prefecture, there are small and medium enterprises which have been highly praised in both domestic and foreign markets for their application of traditional calligraphy brush making techniques to makeup brushes. We will support those small and medium enterprises that strive to produce new products and services by effectively taking advantage of the skills, the agricultural, forestry and fishery products, and the tourism resources available in their region.

(Advancing Administrative and Financial Reform of Central and Local Governments)

Japan continues to face an extremely severe fiscal situation. My Cabinet continues to unflinchingly uphold the principle of making further reduction in expenditures and eliminating waste from fiscal spending. We will maintain economic growth, and tackle head-on with an integral reform of expenditures and revenue while placing top priority on minimizing the financial burden on taxpayers.

We will seek to reduce the GDP ratio of outstanding government debt in a stable manner by the mid 2010s, aiming at a fiscal management that is responsible to future generations. As a first step, in FY 2011 we will definitely achieve a surplus in the primary balance of the central and local governments combined. To this end, in compiling future budgets, we will systematically carry out expenditure reductions, for example by establishing a principle of not easily allocating tax revenue increase to expenditure, but instead allocating it to reductions of taxpayers' future burdens. We have taken the first step in the FY2007 budget by redressing a total of 6.3 trillion yen, fiscal deficit, including the largest-ever reduction -- 4.5 trillion yen -- in the issuance of new government bonds.

With regard to specific Tax Revenues Earmarked for Roads Projects, we will amend for the first time the present 50 year-old system that obligates all applicable tax revenues, including the gasoline tax, to be allocated solely to road development, and we will submit the necessary bills to next year's ordinary session of the Diet.

We cannot ask the people to bear an increasing burden while doing nothing to cut the waste and inefficiency of central and local governments. We will cut the flab thoroughly and advance reforms aimed at "zero waste," thereby aiming to realize a "lean government."

We will drastically reduce the total personnel cost of civil servants by steadily implementing a net reduction of more than 19,000 personnel in national administrative agencies over five years. Regarding reform of civil service system, we will introduce a new personnel evaluation scheme to promote appointments based on merit and ability. We will also promote further exchanges of personnel between the public and private sectors so that both can take advantage of each other's knowledge and experience. We will introduce strict rules of conduct in order to eradicate re-employment of civil servants to the private sector through intrusive intermediation underpinned by budget and authority.

Frequent occurrence of collusive bidding involving public offices in both the central and local governments is extremely regrettable. We will strictly enforce the amended law on the prevention of collusive bidding involving public offices, and unequivocally advance competitive bidding. Furthermore, we will establish new legislation for financial reconstruction of local governments, and will strongly urge local governments to drive administrative and financial reform forward and to strengthen discipline by means such as reducing the wages of local civil servants, a point of contention that has been inviting much criticism due to a gap between the public and private sectors in the regions.

We will submit bills related to reform of policy financing to this session of the Diet, and boldly reduce the number of special accounts by almost half. We will ensure that postal privatization is implemented starting October 2007.

Regarding any possible increases in burden, even after thoroughly executing these reforms, we must secure a stable supply of revenue source in order to avoid shifting the burden onto the shoulders of future generations. We will start full discussions from fall this year, and endeavor to realize fundamental reform of the taxation system, including the consumption tax, from the viewpoint of being in line with the concept of sharing the burden equitably among all generations, while taking into account the forecast of the expenditures required for social security benefits and countermeasures for the declining birthrate, with FY2007 as a target.

(Rebuilding Education)

Rebuilding education is the top priority of my Cabinet. Currently a number of problems have been singled out including bullying and child suicide, a downturn in children's morals and eagerness to study, and declines in educational roles played by families and communities. We believe we have, until now, neglected values such as public service, self-discipline, morals and attachment to and affection for the community and country where we have been born and raised. We believe it is absolutely essential for Japan's future to instill these values in our children.

We will deepen the discussions at the Education Rebuilding Council, make society-wide efforts to promote reforms that reaffirm the basics of education, and usher in "a new era in education."

To ensure the effectiveness of education reform, we will submit bills to this session of the Diet to amend the relevant laws in light of the revisions to the Fundamental Law of Education, which was recently amended for the first time in 60 years. We will also decide early on a new basic plan for promoting education. In order to guarantee all children the opportunity to acquire necessary academic abilities, we will strive to rebuild our public education system by reviewing the education with room for growth to ensure the necessary classroom hours, as well as revising the Teaching Guidelines to enhance the development of Japanese language capabilities, and expand science, math, and moral education.

On the issue of bullying, we will make sure that each classroom confronts bullying head-on, based on the awareness that bullying can happen at any school and to any child. We will work to detect bullying incidents early and respond to them swiftly. Furthermore, we will set up a national hotline to take calls from children with concerns and worries even during the night and on weekends. We will also develop a nationwide "After School Hours Plan for Children" so that children can study and play freely, and spend time together with people in the community after school hours.

Teacher quality holds the key to rebuilding education. We will introduce a renewal system for teaching licenses, and also conduct teacher performance assessments appropriately. We will have more people with rich experience to be hired as teachers, and reward teachers who strive for the cause of education.

We cannot say that boards of education are completely fulfilling the functions expected of them. We will make clear where the responsibility for education lies, and for the future of the children, take resolute steps to develop a system of education administration that will be trusted by the people.

(Realizing a Healthy and Safe Society)

It is my great responsibility to make sure there is no concern for 'senior citizens,' who worked hard and supported the prosperity of post-war Japan. We will promote a comprehensive reform of the current system and construct a social security system suitable for Japan which places value on the spirit of self-reliance and is easy to understand, friendly and reliable.

The public pension system, for which the government has the responsibility, will never become bankrupt, nor will the people who pay into it lose out. We will realize the union of the employee's pension scheme and the mutual aid pension scheme in order to secure fairness between the public and private sectors. We will initiate a "Pension Benefits Bulletin Regular Notification Service" system within this year to inform people 55 years old and older of how long and how much they have paid in pension contributions, and inform them of how much they can expect to receive in the future. We will resolutely eliminate the Social Insurance Agency, and divide it into six sections, and establish a new legal entity with a non-public official nature in order to restore discipline and improve operational efficiency.

As for medical care and nursing, by the end of the current fiscal year, we will formulate a "New Health Frontier Strategy," under which the policy focus will be transferred to prevention and the aim will be to extend healthy life expectancy. We will strive to restrain medical treatment costs by computerizing rezept (payment claims). And we will also endeavor to establish solid regional medical care service which includes ensuring the availability of pediatricians and gynecologists and establishing emergency medical treatment systems in the regions.

Children are a nation's treasure. We must ensure that Japan is a country where people can marry, have children, and raise them with a sense of security. At the same time, we need to recognize anew the splendor and value of the family. We will put into practice the following policies, and formulate an even more comprehensive strategy to address the falling birthrate.

We will establish an allowance for parents with babies and toddlers in addition to the current child allowance, effectively doubling the size of the allowance for first and second children under three years of age to a uniform amount of 10,000 yen. We will increase the maternity leave benefit from the current 40% to 50% of a worker's salary before maternity leave. We will also respond to a variety of needs, such as for extended daycare, and do our best to support parents in making working and child-raising compatible. We intend to realize a society that strikes a good balance between work and life, and is friendly to working people, by strengthening efforts to limit overtime work in order to make more time available for spending with their families.

We will promote the establishment of local networks in municipalities, in which child counseling offices, police, schools, non-profit organizations (NPOs) and others cooperate in order to protect children from abuse.

Ensuring public security and safety, which provides the foundation of daily life, and protecting the country's beautiful environment are major responsibilities of the government.

We will proceed strategically and intensively with disaster prevention measures including countermeasures for large-scale earthquakes and landslides. We will provide prompt and accurate disaster-related information and minimize the damage to elderly and disabled people.

We will aim to restore Japan as the safest country in the world by supporting the activities of volunteer crime prevention patrols in local communities across the country, and by realizing the target of zero unmanned kobans by spring this year. We will strengthen the penalties against drunken driving and cooperate with local communities to eliminate drunken driving.

We will accelerate the implementation of global warming countermeasures based on the Kyoto Protocol Target Achieving Plan. We will further improve passenger car fuel efficiency standards by more than 20% by 2015 to make them the strictest in the world. We will also formulate a timetable for increasing utilization of bio-fuel. By using Japan's energy and environmental technologies, now at the highest level in the world, we will promote cooperation with China and other Asian countries in the area of energy conservation and environmental protection. Furthermore, we will formulate a "21st Century Environment Nation Strategy" by June 2007, which will clearly indicate the orientation of environmental policies to be pursued both in Japan and internationally, and serve as a guideline for Japan's contributions in formulating a future global framework.

(Proactive Diplomacy)

We will carry forward "Proactive Diplomacy" that truly contributes to peace in Asia and the world, diplomacy founded on three pillars: (a) strengthening partnerships with countries that share the fundamental values of freedom, democracy, basic human rights and rule of law, (b) creating an Asia that is open and rich in innovation, and (c) contributing to global peace and stability.

The cornerstone of Japan's diplomacy is the "Japan-U.S. Alliance for the World and Asia." The security environment surrounding Japan is changing drastically, as witnessed in the proliferation of weapons of mass destruction and missiles, the fight against terrorism, and frequent regional conflicts. Under such circumstances, we must further strengthen the Japan-U.S. Alliance in order to preserve Japan's peace, independence, freedom and democracy, as well as to safeguard the lives of the Japanese people. In coordination with the U.S., we will strive for early deployment of a system to defend our country against ballistic missiles.

In addition, we believe that, in order to make greater contributions to the peace and stability of the world, we have to reconstruct the legal basis for national security to befit the times. We will continue to study, based on individual and specific cases, to identify which case constitutes exercise of the right of collective self-defense that is prohibited under the Constitution. The realignment of U.S. Forces in Japan will serve to reduce burdens on local communities while maintaining their deterrence. We will steadily implement the realignment programs, by listening closely to the earnest voices of local communities including Okinawa, and exerting our best efforts to promote these communities' development.

North Korea's nuclear development is something Japan cannot possibly tolerate. With a view to resolving this issue through the Six-Party Talks, we will, under the solid principle of "Dialogue and Pressure," seek greater coordination with relevant countries and demand concrete response from North Korea. Unless the abduction issue is resolved, there can be no normalization of relations between Japan and North Korea. The international community has deepened its understanding of the abduction issue, and international pressure has grown accordingly. We will strongly demand North Korea to ensure the safety and swift return of all abductees. My government as a whole will continue to take comprehensive measures, including a new start of broadcasting of the government's messages directed towards the abductees.

Immediately after I took office as Prime Minister, I visited China and South Korea, and held heart-to-heart talks at the top level, thereby improving relations with both countries. With China, we will build a mutually beneficial relationship based on common strategic interests, so that the peoples of both countries stand to benefit. With South Korea, we will also build a future-oriented close relationship. With Russia, we will strive to develop relations in a wide range of areas, while patiently endeavoring towards resolution of the Northern Territories issue, based on the principle of concluding a peace treaty through resolution of the issue of which country the Four Northern Islands belong to.

With the ASEAN countries, and also with countries with which we share fundamental values, such as India and Australia, we will promote exchanges at the top level, as well as strengthen economic partnerships. We will implement an exchange program to invite 6,000 youths to Japan every year over the next five years, mainly from the countries participating in the East Asia Summit. We will further deepen our partnerships with European countries such as the U.K., France and Germany, where I have recently visited, on issues of common interest to all mankind, such as contribution to peace.

Peace and stability in the Middle East is indispensable for the peace of the entire world, and is directly linked to Japan's national interest. In Iraq, where the situation still remains difficult, we will provide assistance which is appropriate for our country, through airlift support by the Air Self-Defense Force and utilization of official development assistance (ODA) in coordination with non-governmental organizations (NGOs). We will continue to cooperate with international efforts to eliminate and deter the threat of international terrorism in Afghanistan and its periphery.

In order to enable prompt response, with strong political leadership, to diplomatic and national security issues that are becoming all the more complex, we will work to establish structures to strengthen the functions of the Prime Minister's Office as headquarters. We will also work to enhance the intelligence capability of the Cabinet.

I believe that Japan should make contributions that are commensurate with its place in the international community. We will steadfastly strive for comprehensive reform of the United Nations and pursue permanent membership on the Security Council.

The oceans and space have extremely huge potential for Japan's development in the 21st century, and my government as a whole will make strategic efforts in these areas.

In order to carry out the policies that I have just outlined, trust in politics is essential. Politicians must always act upright, in line with the wisdom that "you should never adjust your crown under plum trees" (N.B.: an aphorism meaning avoid any dubious acts which may invite suspicion). I hope that the issue of the political funding system will be discussed fully within each party and parliamentary group.

(Conclusion)

In order to create "a beautiful country, Japan," we must recognize anew what is good and wonderful about our country. We will launch a new project which brings together our collective wisdoms to transmit strategically Japan's new "country identity" for the future: Japan's ideals, visions and uniqueness, so that they are well understood by people not only in Japan, but all over the world.

Towards the creation of a new country, we should deepen our discussions regarding the revision of the Constitution, which sets forth the profile and shape of our nation. It is with keen expectations that I look to this session of the Diet to enact the "Bill Concerning the Procedures for Revising the Constitution of Japan."

There are a countless number of people who earnestly and tacitly strive each day to do their part in their own place: people who give care to the elderly, people working at small and medium enterprises, nurses, firefighters, housewives, and many others in diverse workplaces in different regions of our country. We, the Japanese people, are endowed with unlimited potential and vitality. Indeed, to draw these out is the very core of my vision of creating "a beautiful country." I will sincerely listen to the voices of all those people who are doing their best in their workplaces and conduct governance that meets their expectations.

With my firm belief that our future is bright, I declare 2007 as "The First Year for Creating a Beautiful Country." With all my heart and soul, I will stand at the fore and lead the way, with unwavering determination, to realizing various reforms together with all the people who have the courage to take up the challenges of the future.

Yukichi Fukuzawa once said that the samurai spirit is distinguished by "a willingness to face daunting challenges and persevere to accomplish the tasks." It must have been that challenging spirit, which dares to take on difficult tasks optimistically, that enabled our country to forge the modern Japan from the Meiji Restoration.

Let us join hands together to carve a bright future, believing in the potential of our country and ourselves.

I ask from my heart for the kind cooperation of the people of Japan and all members of the Diet.