Katayama's Post-Extraordinary Cabinet Press Briefing as Finance & State Minister

The press conference began with an explanation of the response to the 2026 Kumamoto Earthquake, followed by questions about the FY2027 budget request standards, fiscal discipline, tax reduction policies, and the use of AI in budget formulation. The Finance Minister presented a new budget framework for implementing, with predictability, measures to raise potential growth through domestic investment, including crisis-management investment and growth investment.

The conventional budget request standards were described as a restrictive framework that included zero ceilings and negative ceilings. Regarding the new policy, the minister expressed the view that it provides a system enabling sufficient requests for necessary budgets and that there is no longer anything that should be called a ceiling. However, the absence of spending caps does not mean unconditional spending; budget formulation will advance the prioritization and focusing of measures.

The Ministry of Finance and the Financial Services Agency have requested that private financial institutions and policy finance institutions respond flexibly so that residents and businesses in disaster-affected areas do not face difficulties securing funds. The government stated its policy of coordinating with relevant parties to minimize the effects on people's lives and the financial economy.

It was explained that shifting permanent measures into the initial budget is expected to improve predictability. The need was also indicated to accurately explain, through full-year comparisons and classifications, spending that may appear large in the initial budget and the economic security framework, in order to avoid excessive market reactions.

It was explained that visible reductions in the public burden, including abolishing the provisional gasoline tax rate, are important for trust between the public and the government.

The Ministry of Finance and the Financial Services Agency have requested that private financial institutions and policy finance institutions handle financing for residents and businesses in disaster-affected areas flexibly. Push-type support is underway, and it was stated that supplies are already available locally. These measures were budgeted in the FY2026 budget based on past disasters, and the policy is to respond if additional needs arise.

The FY2027 budget request will establish a “Strong and Affluent Japan” investment framework separate from regular spending. It will cover measures such as crisis-management investment and growth investment that contribute to raising potential growth through domestic investment. The framework will have no spending cap on requests, allowing ministries to request the required amount, including requests for specific items. To move away from reliance on supplementary budgets, permanent key policies will generally be requested and proposed for inclusion in the initial budget and considered during the budget formulation process.

Each ministry is asked to prioritize its measures and submit requests and proposals by the end-of-August deadline. During budget formulation, spending as a whole will be thoroughly reviewed, beginning with subsidies and funds, and prioritized based on contributions to growth and the extent to which private investment can be induced. Fiscal investment and loan programs and requests for tax system revisions will be handled in the same way.

Regarding tax reduction policies, the stated aim was to revitalize the private economy and consumption and create an economy in which tax revenue rises as a result even without changes to the tax-rate structure. Measures under the Takaichi administration included abolishing the provisional gasoline tax rate, lowering the tax-revenue threshold, and abolishing the environmental performance levy.

It was stated that budget formulation will require methods different from those used previously, in light of advances in cutting-edge frontier AI. Regarding individual projects, when both those submitting requests and those evaluating them discuss numerically how much each project contributes to growth and induces private investment, the minister indicated that generative AI is expected to be used.