Interim Report on the Integrated Reform of Expenditures and Revenues

Japan's fiscal conditions have deteriorated to a state not found among developed countries, so that the Integrated Reform of Expenditure and Revenues is the pressing issue.

On this Interim Report, Nippon Keidanren picked up the challenges Japan faces in achieving reform and expressed its basic views.

On discussions regarding directions for reform must be based on the actual issues that the country faces, the ideal form that Japan's economy and society should take, and the roles that government should play to realize this.

Toward Creating reliable and dynamic economy and security that attracts all the people in and outside of Japan in response to the globalization of the Japanese economy and a society with a shrinking population, we should establish a "Streamlined and well-muscled government" and promote swiftly the Integrated Reform of Expenditures and Revenues.

every possible means should be employed to reform the expenditures side, first more than everything else. While monitoring the progress achieved in that area, the government must examine as quickly as possible drastic reform of the tax system

Issues for the Integrated Reform of Expenditures and Revenues

1. Improvement of the Simplicity and Efficiency of Government Administration

• Early enactment of the Administrative Reform Promotion Bill
• Further promotion of regulatory reform and opening up to the private sector
• Reform of the public servant system
• Continuous review of Independent Administrative Institutions
• Follow-up through policy evaluation and information disclosure
• Raising of administrative efficiency through the effective use of ICT

2. Securing the Sustainability of Public Finances and Prioritized Distribution

• Prompt achievement of a surplus in the primary balance in the early 2010s
• Shrinking the government debt after the recovery of the primary balance
• Improvement of total expenditure management and discipline in local public finances
• Reform of special accounts and government assets
• Prioritized distribution with an eye to demonstrating private sector dynamism: the advancement of science and technology and the development and securing of human resources(Infrastructure for accepting foreigners and a social infrastructure where the elderly and women can demonstrate their full capabilities, tax system and other measures to support childrearing)

3. Establishment of a Sustainable Social Security System

• Review the range and level of benefits
• Using the same ID numbers for social security and tax
• Implementation of the Individual social security accounts
• Setting the target of limiting overall social security benefit expenditures to less than economic growth by the beginning of the 2010s
• Public Pension System: further revision of the benefits
• Medical Care System: limiting total public health insurance benefit expenses for fiscal 2010 to 30 trillion yen
• Nursing Care Insurance System: prioritizing of benefits, raising the self-pay burden of high-income earners,
• Labor Insurance System: review of the three employment insurance programs

4. Drastic Reform of the Taxation

• Establishment of tax system which promotes economic revitalization
• Review of corporate taxation with an eye to strengthening international competitiveness: further lowering the effective corporate tax rate, reviewing the depreciation system
• Raising the consumption tax rate to 10 percent in phased manner as soon as possible while monitoring the economic situation and public expenditure reform