Katayama Briefs Cabinet Decisions and Financial Policy

The policy outline approved by the Cabinet on September 15 set a policy of implementing a reduction in the consumption tax rate on food and beverages and introducing an employment burden relief grant in April 2027. The minister said preparations would begin immediately to ensure smooth implementation.

Many paper documents are still exchanged among exporting and importing companies and financial institutions in trade transactions. The supported demonstration will test whether document transfers and payments can be linked through on-chain documents and integration with stablecoins that three megabanks and others are working to issue jointly.

The minister described the initiative as a positive effort to further improve the efficiency and sophistication of trade operations through on-chain documents, and said the Financial Services Agency would support the demonstration through legal interpretation and other assistance.

The minister said it is important to always have RCC-like functions in place and be able to activate them when needed to protect the financial system and credit markets.

Of the reserve funds, 78.1 billion yen will go toward support for small and medium-sized businesses and others introducing smart cash registers and modifying POS registers, while 33.8 billion yen will fund subsidies for modifying local government tax systems and the public fund receipt account registration system. The minister explained that introducing the grant also requires modifications to local government tax systems.

The Financial Services Agency's Payment Innovation Project (PIP) selected a blockchain-based trade settlement demonstration as its fourth support project.

During a phone call with the U.S. Treasury Secretary on September 25, they exchanged views on financial markets and reaffirmed the need to strengthen Japan-U.S. cooperation and their view that the yen is undervalued. The minister refrained from specific comments on exchange rate levels, saying that Japan and U.S. finance authorities would stay in contact and work to maintain orderly foreign exchange markets.

She refrained from commenting on specific movements in long-term interest rates and said she would continue dialogue with market participants as part of government bond management policy. The minister noted that interest rates are rising in various countries, and that countries outside Japan are also seeing increased spending and large-scale corporate bond market fundraising by hyperscalers.

The Inspection Planning Office has not been established; its creation is being sought as part of the FY2027 staffing and organizational structure request. In light of misconduct cases and management problems at regional financial institutions, the ministry is considering strengthening inspection and supervision functions, training and securing inspection monitoring personnel, and improving methods through post-inspection reviews.

Regarding the RCC, the minister said the incidence of nonperforming loans is low and that she was not aware of any major changes being discussed at present. Reflecting on her appointment in 1996, the failure of Hokkaido Takushoku Bank in 1997, and the failures of the Long-Term Credit Bank of Japan and Nippon Credit Bank in 1998, she described Japan's experience, including the public fund injection system and the Act on Special Measures for Strengthening Financial Functions, as an asset of the Japanese market.