Press Conference: Summary of Finance Minister Katayama’s Post-Cabinet Briefing
Overview
Finance Minister Katayama explained that the FY2027 initial general-account budget requests total approximately 143.1 trillion yen. As the first year of budget-process reform aimed at moving away from dependence on supplementary budgets and providing ongoing measures through the initial budget, the figure should be compared with the combined total of approximately 141 trillion yen for the FY2025 supplementary budget and FY2026 initial budget, representing an increase of approximately 2.5 trillion yen. The government will review special tax measures, subsidies, and funds, while prioritizing policies. Under the “Strong and Affluent Japan” investment framework, it will request approximately 12.2 trillion yen in the general account and approximately 14.2 trillion yen overall, including special accounts. The minister stated a policy of advancing expenditure reform and securing revenue, appropriately managing annual government bond issuance, and achieving both a strong economy and sustainable public finances. Regarding rising long-term interest rates, he said the government would closely monitor their impact and work to maintain market confidence.
Key points
- The FY2027 initial general-account budget requests total approximately 143.1 trillion yen.
- The government will begin budget-process reform to move away from dependence on supplementary budgets and provide ongoing measures through the initial budget.
- The “Strong and Affluent Japan” investment framework will request approximately 12.2 trillion yen in the general account and approximately 14.2 trillion yen overall, including special accounts.
- The government will review expenditure and revenue, appropriately control annual government bond issuance, and achieve both a strong economy and sustainable public finances.
Overview
Finance Minister and Minister of State for Special Missions Katayama explained the results of compiling the ministries’ budget requests and characterized the FY2027 budget as the first year of budget-process reform.
The basis for comparison was the combined total of approximately 141 trillion yen for the FY2025 supplementary budget and FY2026 initial budget, and the difference from the requested amount was explained as an increase of approximately 2.5 trillion yen.
The budget process will scrutinize cost-effectiveness, contributions to growth, and the effects of inducing private investment, while pursuing disciplined resource allocation and prioritization.
Impact
The government said the budget process would enable sustained discussion and aim to create budgets that prioritize policy cost-effectiveness.
The effects of rising interest rates cited included loan interest payments by households and businesses, the government’s interest burden, household interest income, and fluctuations in the valuation of bonds held by banks and businesses.
The government indicated that it would carefully explain and implement its policy on fiscal sustainability and continue securing confidence from the markets.
Details
The government will inspect and review special tax measures and subsidies, eliminate duplication in light of policy objectives, reorganize and integrate programs, reassess policy priorities, and pursue bold prioritization.
For funds, mechanisms for returning money to the treasury will be made concrete during the FY2027 budget process, taking into account the prevention of long-term idle balances and the reduction of opportunity costs. The aim is to transform dormant funds into “active funds.”
Under the “Strong and Affluent Japan” investment framework, the government will scrutinize contributions to growth and the effects of inducing private investment, and develop measures that enhance supply capacity and earning power. Investment in GX, AI, and semiconductors will be requested through the Energy Special Account.
On the expenditure side, the government will distinguish expenditures that should be expanded from those that should be reviewed. On the revenue side, it will pursue from a zero-based perspective the securing of non-tax revenue from special accounts and funds, and scrutinize the scale of public finances after assessing tax revenue trends.
The Basic Policy 2026 identified steadily reducing the ratio of total national and local government debt to GDP as the core objective of fiscal management, and indicated a policy of specifying annual government bond issuance on that basis.
The approximately 40 trillion yen in government bond issuance, no more than the previous fiscal year, indicated by Prime Minister Takaichi was described as an explanation of the fact that the post-supplementary-budget issuance amount could be restrained through increased tax revenue, not as a fixed benchmark for FY2027.
Regarding the meeting with U.S. Treasury Secretary Bessent, Minister Katayama said he explained how to balance fiscal discipline and growth and that he had received no official request concerning central bank policy. He also referred to the Bank of Japan’s neutrality and explained that both ministries shared the understanding that there had been no unilateral policy request in their exchanges.