Basic Policy on Economic and Fiscal
Management and Reform 2023

An Accelerating New Form of Capitalism: Expanding Investments for
the Future and Realizing Structural Wage Increases

Provisional Translation
Cabinet Decision onJune 16, 2023

I. Basic Views on Macroeconomic Management
Proceed with bold reforms to overcome the historical and structural changes and challenges facing Japan, both internal and external,
which may be referred to as “turning points in the times.” With pay hikes at 30-year highs and a strong appetite for investment in the corporate sector, now is the time to accelerate these positive movements and mindsets.
 While aiming for a virtuous cycle of wages and prices, which entails raising wages and ensuring appropriate price pass-through and markup of costs, achieve avirtuous cycle of growth and distribution, by sustainably expanding public-private partnership investments in areas such as investment in people, green projects,and economic security that are likely to be underinvested if left to the market or competition, thereby reviving the substantial middle class.
 In line with ”Policy on Future Strategy for Children”, drastically strengthen government-wide efforts to reverse the trend of declining birthrate.
 At the G7 Hiroshima Summit, the importance of supply-side reforms aimed at sustainable growth through investment in people and private investment wasreiterated. Lead discussions on building an international consensus on policy management and strengthening cooperation while achieving sustainable growth bymobilizing all budget and tax, regulatory and institutional reforms.

 The Government aims for a virtuous cycle of wages and prices and a virtuous cycle of growth and distribution,
involving wage increases and appropriate price pass-through of costs.
 The Government expects the Bank of Japan to achieve the price stability target of two percent in a sustainable andstable manner, accompanied by wage increases.
 By working in close cooperation between the GOJ and the Bank of Japan, we will eliminate the long-runningdeflationary mindset and foster widespread recognition that will not fall back into deflation, leading to an end todeflation.
 Undertake bold administrative and financial reforms in line with the revolution of the digital society.
 Rebuild the economy and work toward fiscal health as public finances depend on the economy.

II. An Accelerating New Form of Capitalism
Realization of structural wage increases through the trinity labor market reforms, andstrengthening investment in people, and creating a substantial middle class

Drastic strengthening of measures to copewith the declining birthrate and child policy

 Promotion of Acceleration Plan for Child and Childrearing
 By strengthening investment in people and promoting labor market reforms, achieve sustainable and structural wage increases that will overcome high prices.
Support Trinity labor market reforms
 Reverse the trend of declining birthrate by drastically strengthening
 Support for skill improvement through upskilling and reskilling (aiming for the majority of upskilling and reskilling support benefits being given to individuals withinchild and childrearing policies.
five years) as well as introduction of job-based pay on the reality of individual companies.
 Based on ”Policy on Future Strategy for Children”, promote
Facilitate labor transfer into growth areas (via review of unemployment benefit system, amendment of The Model Rules of Employment, revision of retirement“Acceleration Plan for Child and Childrearing Support” without
income tax system, etc.).
requiring the people to bear any substantial additional burden.
 Growing household incomes and the formulation of a substantial middle classGeneral Principles for Child-Related Measures
 Improve the treatment of non-regular workers, raise the minimum wage (a goal for achieving a national weighted average of 1,000 yen per hour was discussed
 Create “Ibasho” (places where one feels comfortable, safe andthis year, and a policy of raising wages more after achieving 1,000 yen per hour will be discussed this summer and thereafter) and reduce regional disparities,
promote appropriate price pass-through and fair trading, realize a nation facilitating asset management, and implement the “Doubling Asset-based Income Plan.”. accepted) for children and prevent child abuse and child poverty.
Marriage support, etc.
 Promotion of diverse work styles
 Beyond segmentation, coordinate children's policies with diverse
 Study on expanding employment insurance coverage for part-time workers (to be implemented by FY2028), further promotion of work-style reforms, etc.
measures such as education and housing.

Expanding investment and implementing economic and social reforms
 Increasing domestic investment and strengthening supply chains through public-private partnerships
 By mobilizing all budgetary, tax, regulatory, and institutional reforms, quickly realize 115 trillion yen in private capital investment, induce private  Driving Startups and Converting to New Industrial Structure
Promoting Impact Investment
investment, create quality jobs in the region, and increase the income of young people. Actively address issues, including antitrust laws.
 Aggressively attract people, goods, money and ideas from overseas to achieve the inward FDI target of 100 trillion yen at earliest date.  In order to increase the size of investment by more than 10 times in five years, promote a"Global Startup Campus," strengthen the supply of funds and diversify exit strategies in Aim to become the core of the global supply chain, including next-generation semiconductors, and work to expand investment with theaccordance with our Startup Development Five-Year Plan. Facilitate startups to easily enter
government-wide efforts.
and exit markets.
 Acceleration of GX, DX, etc.
 (GX) Promotion of thorough energy efficiency improvement, application of renewable energy as main power sources (implementation of  Promoting Science, Technology and Innovation through Public-Private Partnerships
Drastic expansion of science and technology investments through public-private
next-generation solar cells, etc. in society), utilization of nuclear power (embodiment of reconstruction to next-generation innovative
reactors, etc.), early construction of supply chain of hydrogen and ammonia, realization of public and private GX investment of 150 trillion partnerships in the fields of AI, quantum technology, health and medicine, fusion energy,and biotechnology, and strengthening of initiatives in the fields of space and ocean, etc.
yen for 10 years, initial investment leveraging GX Economy Transition Bonds, and prompt realization and implementation of the Pro Developing Inbound Strategies
Growth Carbon Pricing Concept.
 The recovery of international exchange in Japan. The establishment of international brain (DX) Review of administrative services of national and local governments in the context where the national government supports local
areas by leveraging the power of digital technology. Make efforts to ensure the safety and trust of the Individual Number Card system, to circulation, the revival of Japan as a tourism nation (such as the early achievement of 5
trillion yen in inbound consumption), the acceptance of highly-skilled foreign professionals,
improve convenience and functionality, and to create an environment in which people can obtain the card smoothly. Implement theand the review of the ideal form of Technical Intern Training Program and Specified Skilled
Cybersecurity Strategy, etc. Realize a decentralized digital society.
Worker System. Set-up of an international financial center in Japan as a nation facilitating (AI) Leading international discussions on AI, including through the Hiroshima AI Process. Responding appropriately to diverse risks.
asset management.
Strengthening of optimal use and development capabilities.

Revitalization of local communities and small businesses

Creation of an inclusive society Women’s Empowerment (resolution of the L-shaped curve, acceleratingpromotion of women in managerial positions, and economic empowerment) Building an inclusive and cooperative society  Support for the“ employment ice age ” generation  Measures for loneliness and isolation

 Realization of the Vision for a Digital Garden City Nation  Building local communities optimizing their own characteristics
and expanding the population with strong relationship to the areas  Building a land with a seamless connection of hubs andre-designing transportation  Enhancing the vitality of small and medium enterprises  Innovation in logistics (drastic andcomprehensive measures for the 2024 problem of logistics industry, etc.)  Promotion of culture, arts, and sports

III. Responding to the Environment
Changes Surrounding Japan
Responding to changes in the international
environment
 Strengthening of diplomacy and security
 Actively engage in diplomacy based on the outcomes of theG7 Hiroshima Summit. The G7 bands together andstrengthens its engagement in the Global South. Steadily
implement the Hiroshima Action Plan toward a world without
nuclear weapons.
 Expand ODA in various ways based on the Development
Cooperation Charter.
 Fundamentally reinforce our defense capabilities within thenext five years and strengthen comprehensive defense
architecture.
Strengthening collaboration with like-minded countries andothers.
 Promotion of economic security policies
 Steady implementation and reinforcing efforts of the Economic
Security Promotion Act.
 Strengthening of energy security
 Shift to a resilient energy supply and demand structure thatcan withstand energy crises.
 Strengthening of food security and promotion ofsustainable growth of agriculture, forestry and fisheries
 Establishment of food supply base and sustainable foodsystems, promotion of exports, implementation of smart
agriculture, forestry and fisheries.
 Promotion of international economic partnerships, andpromotion of overseas business investments byJapanese companies
 Maintaining and strengthening the multilateral trading system,
including leading the UK's CPTPP accession procedures.
Flexible and bold, uniquely Japanese support for thereconstruction of Ukraine.

Disaster prevention and mitigation, nationalresilience, reconstruction from the Great
East Japan Earthquake, etc.
Safety and security of people's lives

IV. Medium- and Long-Term Economic and Fiscal Management
Sustainable economic and fiscal management from a medium- to long-term perspective

Building a sustainable social security system

 Get out of the COVID pandemic and return the spending structure to normal.
 Focus fiscal policy on raising the potential growth rate and resolving social issues. Promote medium- to longterm scheduled investment to tap private demand and solve social issues. Promote high-quality and efficientadministrative and fiscal reforms by maximizing wise-spending efforts.
 The government will resolutely pursue fiscal consolidation and work on achieving the current target.
 Consider financial resources of scheduled multi-year investments in an integrated manner to balance
expenditures and revenues over multiple years.
 Consider the ideal progress indicators for the virtuous cycle of growth and distribution and a framework forachieving both economic revival and fiscal consolidation with an eye on administrative and fiscal reform in thedigital age, in order to develop a medium-term economic and fiscal framework.
 Strengthen EBPM effort in order to clarify priorities in expenditures and ensure outcome-oriented spending.

 Realize social security system for all generations, strengthen drug discovery capability , and realize medical DX.
 Take necessary measures in the next revision of medical fees, etc. considering an increase in prices and wages, businessconditions of care providers, the need to secure human resources amid a decrease in the number of workers and the impact onpatients, users, and the burden of insurance premiums.

Development of infrastructure that enhances productivity and supports the economy and society
New division of roles between national and local governments, etc.
Promotion of education and research activities that support economic and social vitality
 Revitalize high-quality public education, etc. (enhancing the attractiveness of the teaching profession, promoting the GIGA School
Program as a national policy, reducing the households’ burden of higher education expenses, etc.).

V. Policy for Near-term
Economic and Fiscal
Management and FY2024
Budget Formulation
 Continue to respond flexibly basedon price and economic trends.
 Integrated economic and fiscal
reforms will be promoted based on
this Basic policy, the Basic Policy
2022, and the Basic Policy 2021.
However, this should not lead tonarrowing the range of available
options for important policies.