Katayama Outlines Fiscal and Economic Priorities at Press Conference
Overview
Minister Katayama explained her policy of pursuing both a strong economy and fiscal sustainability under “responsible proactive fiscal policy.” Her priorities include measures against rising prices, tax and social security reform, growth investment, budget formulation reform, financial strategy, and maintaining an orderly foreign exchange market. The government will submit related bills to the extraordinary Diet session as a unified package covering a lower consumption tax rate on food and beverages and a support payment to reduce workers’ burdens, with the aim of enacting them early. In response to questions, she addressed the FY2027 budget, funding sources, and dialogue with the market.
Key points
- Place the pursuit of both a “strong economy” and “fiscal sustainability” at the center of economic and fiscal management.
- Legislate a lower consumption tax rate on food and beverages and a support payment to reduce workers’ burdens as a unified package, aiming for early passage during the extraordinary Diet session.
- She outlined plans to use investment allocations, move away from reliance on supplementary budgets, and pursue expenditure and revenue reforms in budget formulation.
- She said Japan would maintain communication with finance ministries in other countries and work to maintain orderly foreign exchange markets.
Overview
Based on the basic policy of the Second Takaichi Cabinet following its reshuffle, the government will promote crisis management investment and growth investment, and aim for economic growth across the Japanese archipelago through industrial cluster plans. The minister described her central mission as achieving both economic growth and fiscal sustainability by steadily lowering the debt-to-GDP ratio in a virtuous cycle driven by growth.
She identified responses to rising prices as the top priority and also said that, to strengthen supply capacity, she would gauge market needs in meetings with foreign counterparts and encourage the adoption of Japanese products.
Impact
She explained that a temporary reduction in the consumption tax rate on food and beverages and the introduction of a support payment to reduce workers’ burdens are intended to ease the strain on low- and middle-income people facing high prices and tax and social insurance burdens.
Details
The two measures will be treated as a package, and legislation will be advanced based on discussions at the National Conference on Social Security. Related bills based on the policy outline approved by the Cabinet on the 15th will be submitted to the extraordinary Diet session, with the aim of explaining them carefully and securing early passage.
Under investment allocations, ministries can request the budget needed for sound policies, while the budget formulation process will scrutinize their contribution to growth and their ability to stimulate private investment. Ongoing measures will be funded in the initial budget to move away from reliance on supplementary budgets. Tax incentives and subsidies will also be reviewed, and policy priorities reconsidered. The government will assess the fiscal scale that is feasible while steadily lowering the debt-to-GDP ratio, and will set out a concrete full-year government bond issuance amount.
The financial strategy will build on efforts to establish Japan as an asset management hub and promote growth investment, while making Japanese government bonds more attractive to individual investors and supporting the intermediary role and soundness of regional financial institutions. On foreign exchange, she said that Japan conducted a coordinated yen-buying intervention with the U.S. Treasury at the end of July, and would maintain communication with finance ministries in other countries and work to preserve orderly markets.
In response to questions, she said that full-scale work on responsible proactive fiscal policy would proceed during formulation of the FY2027 budget proposal. Regarding revenue from taxes and funding sources for measures such as consumption tax cuts, she said the government would pursue expenditure and revenue reforms and explain its outlook at the designated time.