(Provisional Translation)

Statement by Prime Minister Junichiro Koizumi on the Guidelines for Formulation of the FY2003 Budget (Cabinet Decision) Responding to the Proposals of the Council on Economic and Fiscal Policy (CEFP)

November 29, 2002

Today, based on the proposal put forward by the Council on Economic and Fiscal Policy (CEFP), the Guidelines for Formulation of the FY 2003 Budget were decided by the Cabinet.

In these Guidelines, we have carried forward from last year the policy of realizing a "budget for resolute reform" from perspective of "no growth without reform," in the formulation of the FY2003 Budget.

"Ceaselessly carrying out structural reforms without sanctuaries" has been the unswerving and consistent policy of the Koizumi Cabinet. With a view to clearly reflecting this posture in the budget formulation, I instructed each Cabinet Minister to take "initiative" in reviewing "from the roots" their respective systems and measures in order to strengthen the decision-making system led by the Prime Minister. The Council on Economic and Fiscal Policy (CEFP) has conducted intensive discussions on this since summer 2002.

As a result, specific directions of reforms to be implemented in the next fiscal year have been incorporated in the Guidelines for Budget Formulation. For example, these include integration of plans related to public works projects and a review of emergency measures laws and preparations of necessary legislature, a transition to an energy policy that gives consideration to global environment measures, a transition to agriculture, forestry and fishery policies that truly give priority to the consumer, and reform of the three fiscal major measures between central and local government.

In order to realize the rebirth of the Japanese economy through sustained private sector-led growth, it is imperative to create a society in which we can fully maximize the latent potential of our nation that has been cultivated through the tireless efforts of the people by implementing structural reform through "financial system reform," "tax reform," "regulatory reform" and "expenditure reform" in an integrated and coordinated manner. However, that cannot be achieved overnight and it is vital that we advance toward it based on a future-oriented posture with firm commitments.

In the FY2003 Budget, we will steadily advance structural reform in the fiscal issues in order to make firm the pace toward the structural reforms for which we are aiming. To this end, from the perspective of the shift "from the public sector to the private sector" and "from the central to the local governments," general expenditures and general account expenditures will be maintained at levels lower than those of previous fiscal year (i.e. FY2002) in real terms by reducing unnecessary expenditures and increasing fiscal efficiency. At the same time, we will achieve "qualitative improvement" in expenditures by boldly prioritizing budget allocations to areas that will lead to the future development of our nation, such as "expand growth frontiers-science and technology, education, and IT," "build attractive urban areas and local areas with their own ideas and characteristics," "take necessary measures to build a fair and secure society addressing the aging society and the declining birth rate" and "construct an environment-friendly society and economy to deal with global environmental problems."

The Koizumi Cabinet will unite to formulate an FY2003 Budget worthy of being a "budget for resolute reform" and will advance forward in creating a vibrant economy and society and a sustainable fiscal structure.

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