For the Materialization of Urgent Economic Recovery Measures
- Promoting Projects as Bridges to the 21st Century -
October 30, 1998|
(Japan Federation of Economic Organizations)
Japan's economy is in a severe state of crisis. In order to revitalize its economy, the Japan's government now has to stabilize the country's financial system, reform the tax system and promote public investment at the earliest possible date.
In order to fill the domestic deflationary gap, which seems to amount to some 20 to 30 trillion yen, it is necessary to provide additional financing of more than 10 trillion yen. The government should present a framework for this extra financing in November and summon an extraordinary session of the Diet by the end of this year in order to draw up a supplementary budget. The Japan's government should materialize urgent economic recovery measures based on guidelines mentioned below. Especially, the government should promote public investments that will serve as a bridge to the 21st century by compiling the supplementary budget. The governmental efforts will ease the Japanese people who currently have a sense of insecurity in employment and income.
- Basic Guidelines for Public Investment
- Intensive and Effective Investment in Projects Essential to Japan in the 21st Century
Public investment should be directed towards projects that provide a bridge between the present and the 21st century.
The conventional concept of public works should be discarded; the government should not confine public works included in the supplementary budget to ones that can be completed within a fiscal year. In order to revitalize Japan's economy, the supplementary budget should include public works whose completion needs time beyond this fiscal year. Also, the government should promote public works whose progress has been held in check by single-year budgetary restrictions.
- The Withdrawal of the Postponement Policy of Long-Range Projects with High Economic Effects
Various long-term plans of building important social capital in Japan have been postponed under the name of the fiscal structure reform. The government must withdraw the postponement policy.
The basic policy for compiling the budget for fiscal 1999, which received the cabinet approval on August 12 this year, still requires the government to hold in check the progress of projects for the 21st century with high economic effects. The government should change this position and promote projects such as high-quality trunk roads, new bullet train lines, large-scale projects for nuclear power, nuclear fusion, space development, and transfer of capital functions.
- Flexible Allocation of Budgets between the National and the Local Governments
Since Japanese local governments are suffering from financial difficulties, the local authorities must conduct bold administrative reforms to reconstruct their finances. Moreover, in order to ensure the smooth running of these public works, the national government should fully finance more public works and, as a temporary measure, sharply raise the subsidies given to cooperative projects with the local authorities.
- Promotion of Projects that Encourage Private Investment and Produce Immediate Economic Effects
Considering the current economic situation in Japan, public investment must induce private investment effectively. The government should intensively promote projects that can produce an immediate economic effect. The primary areas of the investments are urban development, distribution, information, welfare, the environment, science and technology, energy, and new business. Deregulation and the use of so-called Private Finance Initiative(PFI) are also essential in creating the sorts of environment that facilitates the promotion of private enterprise.
- Continuous Budgetary Execution for Public Works and the Public Disclosure of How Budgets are Used
The government should endorse budgetary carry-over to the next fiscal year to ensure continuous budgetary execution for public works.
At the same time, it must be clarified and be disclosed to the public how the supplementary budget is used and what contribution it is making to the structural reform of the Japanese economy.
- Prior Investment Projects by Area (Examples)
The following is a list of projects in which major investment efforts should be made. The government must give concrete shape to these projects and promote them as soon as possible, while it proceeds with deregulations in order to create environments that will help the private sector to set up new enterprises with greater ease.
- Redevelopment of Cities and Improvement of Residential Environment
Improvement of traffic infrastructure for smoother links within and between regions
- Preparation of city plan roads (early improvement of Loop 2 between Toranomon and Shinbashi, loop highways, radiating trunk roads)
- Pushing forward the building of a new Joban railway line( Metropolitan Inter-city Railway)
- Pushing forward the construction of a 13th line on the corporation subway system (between Ikebukuro and Shibuya)
- Early completion of four sections along the three new bullet train lines
Promoting the development of comfortable towns
- Encouraging redevelopment projects implemented by the private sector (including the revision of subsidy rates by the national government)
- Expansion of 2.5 trillion yen of government guarantees regarding private-sector loans needed for land procurements by the Organization for Promoting Urban Development
- Metropolitan institutions Expansion of eligibility for interest-free financing by the Organization for Promoting Urban Development to include private entrepreneurs
- Foundation of a subsidy for the construction of long-life condominiums
- Increased construction of multipurpose conduits, including the laying of underground cables
- Remodeling of official residences and public houses into high-rise buildings (combination of commercial facilities and/or offices with an apartment house) using an equivalent value exchange system
- Preparation of underground parking lots in urban areas
- Utilization of a functionally-upgradable intensive land-use system, and of land-use system for attracting high-rise residential buildings
- Promotion of projects for revitalizing central city areas
Strengthening cities against disaster
- Strengthening earthquake-resistance of basic urban facilities
- Construction of superior embankments (for the Arakawa, Edogawa, Yodogawa and other rivers) and diversion of rivers underground (eg. moving the Shirakogawa River below the Loop 7)
- Redesigning urban parks to serve also as disaster-mitigation centers.
- Increased Efficiency of Distribution
Removal of bottlenecks for smoother circulation
- Promoting construction of metropolitan ring-roads (the Central Circular Line, the Tokyo Gaikan Expressway, and the Inner Circular Line); the Tokai automotive ring road; and the Osaka Bay ring road
- Priority improvements at bottleneck sites causing traffic congestion on roads in and around Tokyo (eg. providing additional right-turn lanes at the Yahara Intersection, and improving the Oizumi Junction on the Tokyo Outer Ring Road)
- Early construction of projected high-standard trunk roads (eg. the New Tomei Expressway and the New Meishin Expressway); broadening of roads from existing two temporary lanes to four lanes (eg. the bypass between Koshigaya and Koga along National Route No.4)
- Early construction of the Nanpou cargo railway in Nagoya
Improvement of infrastructure at nodes joining land, sea and air transportation modes
- Preparation of cargo railways for access to container piers by, for example, extending side tracks from freight terminals in Tokyo to Oi Pier
- Preparation of terminals specializing in container freight in domestic commerce
- Strengthening of links between key distribution centers (including the country's five major ports) and inland areas (eg. reinforcement of the existing bridges to cope with larger-sized vehicles)
Improvement of infrastructure to promote computerization and standardization of distribution activities
- Promoting the introduction of Electronic Toll Collection(ETC) System-- establishment of a system for installation/subsidizing of the required vehicle on-board devices
- Joint management of pallets and construction of a recovery system as social capital
Priority preparation of centers for international goods distribution and human circulation
- Early construction of Chubu New International Airport and encouragement of the Second Phase Development Project of Kansai International Airport.
- Basic Preparations for the Creation of a Highly Wired Society
Computerization of the government administration
- Computerization of revenue and expenditure procedures
- Electronic processing of and network formation for communications to administrative authorities, including applications, filing, reporting, notification and replies
- Electronic processing of and network formation for public procurements
- Construction of networks for promoting one-stop services
- Online access to official documents/data of the national government, national Diet, court of justice, etc.
Computerization of the educational system
- Linking elementary, junior-high and senior-high schools to the Internet; provision of a personal computer for each teacher; building of intramural school networks; creation of home pages
Computerization of medical and welfare services
- Creation of network linking all hospitals and welfare facilities
- Adoption of a health insurance card in the form of an IC card, and enhancement of environment to allow greater network utilization
- Creation of a network to support home care-giving services
- Electronic processing of and network formation for patient admissions
Support in countermeasures for the "Y2K problem"
- Improvement of Welfare Infrastructure for a Birth-rate-declining and Aging Society
- Introduction of barrier-free railway stations and sidewalks (widening of roads and elimination of steps); provision of escalators and elevators
- Reconstruction and expansion of national and public hospitals and computerization of clerical works
- Provision of public housing complete with health care services, and of special nursing homes allowing for private-sector participation
- Government-owned and company-operated health care facilities for elderly people in urban areas
- Installation of day nurseries in railway stations
- Improvement of Environment-Friendly Infrastructure Toward the Construction of a Recycling Society
- Increased construction of waste-disposal facilities
- Promoted construction of coastal waste processing facilities(called the Tokyo Bay Phoenix Plan)
- Provision of waste-disposal facilities which release minimal levels of dioxin
- Promotion of Mega-Science Projects as Part of a Strategic Policy for Industrial Technologies
- Detailed planning of a multi-purpose intelligence satellite project
- Development of global monitoring satellite technology
- Technological development for mission equipment to be mounted on multi-media mobile telecommunications satellites and monitoring satellites
- Improvement of ground control operations including adoption of satellite operation simulators
- Improvement of satellite operations monitoring network
- Detailed planning for floating structures (eg. for use as disaster-mitigation centers)
- Promotion of pluthermal nuclear facility plan(including construction of related facilities)
- Installation of comprehensive RI research facilities
- Detailed planning for a quantum science research institution
- Detailed planning for a neutron science research center
- Building an Environment Conducive for the Development of New Industries and New Businesses
- Approval of national university faculty members to become private enterprise executives
- Support for establishing technology licensing offices in universities
- Creation of new industries by setting up new businesses within an enterprise or/and subdivision of an enterprise (eg. systems for coupled tax payment and for the exchange of company stock)
- Support to unemployed individuals wishing to start a business (in terms of taxation and funding)
- Streamlining of procedure for establishing an affiliate company
- Fee-charging employment exchanges and deregulation regarding commercial human resources providers
- Early introduction of a fixed-payout company pension
- Revitalization of the over-the-counter stock market
- Promotion of outsourcing of government services
- Expansion of opportunities for participation of entrepreneurs in public procurement activities
- Detailed Planning for the New Initiative to Overcome the Asian Currency Crisis(the New Miyazawa Initiative)
- Granting of funds to other Asian countries through the Import-Export Bank of Japan
- Procurement by the Import-Export Bank of Japan of sovereign bonds issued by other Asian countries
- Granting yen loans to other Asian countries.
- Prompt Implementation of Effective Taxation Reforms
Along with implementation of public investment, the taxation reform is another priority for Japan. A reduction in effective corporate tax rates to 40% ahead of schedule, and early implementation of additional reductions in income and residential taxes are particularly important to expand domestic demand.
With these taxation reforms, which have immediate economic effects, public investment can have major impact on the Japanese economy. We are witnessing consumer behavior such as a postponement of home purchases in anticipation of relevant tax cuts, which have become a subject of political discussions. Therefore, any delay of taxation reforms might adversely affect Japan's economic recovery. The government should convene an extraordinary session of the Diet to actualize taxation reforms in the following areas so that the reform can have synergetic effects with public investments that are incorporated in the supplementary budget.
- Temporary Expansion of Tax Incentives to Encourage Home Purchases, and Introduction of Income-Tax Deductions for Loan Interests on Residential Property
The current tax incentives for home purchases have long supported the housing demand especially for middle-income taxpayers. The government should temporarily expand the current tax incentives to give an further stimulus to the demand. The applicable period for tax deductions should be extended from the current first six years of ownership to ten years. Moreover, the tax deductions should be allowed from residential taxes, and the incentive should cover purchasing of the building site.
At the same time, in order to deter postponement of home purchases and to boost the economy, there is a need to promptly introduce, in the form of an institutional tax-system reform, the much-demanded income-tax deductions for loan interests on properties for residence.
- Abolition of Real Estate Acquisition Tax and Sharp Reduction in Registration License Tax and Revenue Stamp Duties
The real estate acquisition tax should be abolished as it places an added psychological burden on prospective Japanese home purchasers. The registration license tax for real estate acquisitions should be lowered and replaced by a handling charge, and revenue stamp duties should be reduced to a single and low level.
- Revision of Securities-Related Taxation
Considering the current state of the Japanese securities market, the securities transaction tax and the bourse transaction tax should be abolished immediately. Furthermore, taxes on capital gains from stocks held for long terms should be reduced, double taxation on dividends should be eliminated, the stock option tax system should be expanded, and approval given to summing up losses from stock investments with other incomes.
- Exemption of Automobile Acquisition Tax for Renewed Cars
The automobile acquisition tax should be exempted for a new car bought to replace an old one held for more than a certain number of years following registration.
- Revision of Amortization of Information and Telecommunications Equipment
The legal life of personal computers should be shortened from the current six years to around three years, and the ceiling for annual deductions per a personal computer should be raised from the current 100,000 yen to 300,000 yen.
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