Policy 1-1-1: Initiatives aimed at achieving greater efficiency in public finance, etc. through prioritized allocations of budget

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1 Policy Goal 1-1: Improve the efficiency and quality of public finance through prioritized allocations of budget General outline of the goal The government is conducting numerous activities in a broad range of fields and is procuring funds necessary for these activities through means that include taxation and issuance of bonds and then supplying funds to necessary fields. Bearing in mind economic and financial circumstances, it will be necessary to bring increased efficiency and effectiveness to all financial activities based on the principle of selection and concentration, using an approach that focuses allocation of all expenditure (both general accounts and special accounts) on fields with high necessity and, conversely, does not allocate expenditure to fields with low necessity or relatively low priority. ( for achieving the goal) Policy 1-1-1: Initiatives aimed at achieving greater efficiency in public finance, etc. through prioritized allocations of budget Policy 1-1-2: PR activities (quantitative ) Policy 1-1-1: Initiatives aimed at achieving greater efficiency in public finance, etc. through prioritized allocations of budget Policy A-1: Preparing the budget proposal for the next fiscal year in accordance with the Mediumterm Fiscal Plan (value of improvements in the primary balance of the government s General Account) FY Target figure FY2013 (FY2014 budget) Approx. 4trillion yen 5.2trillion yen FY2014 goal (FY2015 budget) Approx. 4trillion yen 4.6 trillion yen This is because the Medium-term Fiscal Plan (approved by the Cabinet on August 8, 2013) stipulates the fiscal consolidation target of improving the primary balance of the General Account by at least 4 trillion yen in both FY2014 and FY2015, thereby halving debt as a percentage of GDP in the primary balance of both the central and local governments compared to the FY2010 level by no later than FY2015. (Note) All figures relate to the initial budget. ( the level of rating) The MOF succeeded in improving the primary balance of the central government s General Account by 4.6 trillion yen, surpassing the target set in the Medium-term Fiscal Plan, so the level of was rated.

2 Policy B-1: Prioritized allocations when formulating the budget, in accordance with the Basic Principles of Budget Formulation In formulating the budget, the MOF will conduct a fundamental review of all areas of the budget with no exceptions, including social security and other non-discretionary expenditure, and will then prioritize the allocation of budget funds to measures that contribute to economic growth. In the budget for FY2015, as well as promoting powerful measures to address the various challenges that Japan faces, including regional revitalization and child-rearing support, the MOF conducted a review of all areas of the budget with no exceptions, including social security reform, and succeeded in setting priorities and achieving greater efficiency in expenditure. This is because the Basic Principles of Budget Formulation for FY2014 (approved by the Cabinet on December 12, 2013) stipulates that, in formulating the budget, the MOF will conduct a fundamental review of all areas of the budget with no exceptions, including social security and other non-discretionary expenditure, so it is anticipated that a response based on the same policy will continue to be required in future. ) ( the level of rating) In the budget for FY2015, as well as promoting powerful measures to address the various challenges that Japan faces, including regional revitalization and child-rearing support, the MOF conducted a review of all areas of the budget with no exceptions, including social security reform, and succeeded in setting priorities and achieving greater efficiency in expenditure. As a result, it put together a budget that achieved compatibility between economic revitalization and fiscal consolidation, so the level of was rated. Policy1-1-1-B-2: Appropriate response to the Great East Japan Earthquake when formulating the budget As well as ensuring that funds of around 25 trillion yen are secured for reconstruction during the Concentrated Reconstruction Period, the MOF will accelerate initiatives that will lead directly to recovery and reconstruction. Moreover, the MOF will continue to adopt a more rigorous approach to efforts to account for the money spent, to prevent criticism that funds are being diverted to unrelated purposes. In drafting the budget for FY2015, as well as ensuring that funds of around 26.3 trillion yen are secured for reconstruction during the Concentrated Reconstruction Period, the MOF has accelerated initiatives that will lead directly to recovery and reconstruction from the tsunami, earthquake, and nuclear accident. In doing so, as well as seeking to secure the necessary budgetary funds, with a view to ensuring the smooth implementation of reconstruction projects and also taking into account the status of budget implementation to date, the MOF has continued to enforce more rigorous standards for accountability in the spending of these funds, to prevent criticism that funds are being diverted to unrelated purposes.

3 This is aimed at dispelling the anxiety of people in disaster-afflicted areas concerning funding for reconstruction in the aftermath of the Great East Japan Earthquake, as well as accelerating the pace of reconstruction in those areas. ( the level of rating) In drafting the budget for FY2015, as well as ensuring that funds in excess of 25 trillion yen were secured for reconstruction during the Concentrated Reconstruction Period, the MOF accelerated initiatives that will lead directly to recovery and reconstruction from the tsunami, earthquake, and nuclear accident. In doing so, as well as seeking to secure the necessary budgetary funds, with a view to ensuring the smooth implementation of reconstruction projects and also taking into account the status of budget implementation to date, the MOF continued to enforce more rigorous standards for accountability in the spending of these funds, to prevent criticism that funds are being diverted to unrelated purposes. Accordingly, the level of was rated. ) Policy1-1-1-B-3: Appropriate use and reflection of budget implementation surveys, etc. when formulating the budget The MOF will ensure that budget implementation surveys, policy evaluations, administrative project reviews, final accounts and audit reports, and Diet comments and resolutions are used and reflected appropriately when formulating the budget. The MOF ensured that budget implementation surveys, policy evaluations, administrative project reviews, final accounts and audit reports, and Diet comments and resolutions were used and reflected appropriately when formulating the budget. This is aimed at strengthening the check and act functions in the budgetary Plan (budget formulation) Do (budget implementation) Check (evaluation and audit) Act (reflection in the budget) cycle and feeding the findings back into the budget accurately, in order to ensure more efficient and effective use of treasury funds. ( the level of rating) The MOF ensured that budget implementation surveys, policy evaluations, administrative project reviews, final accounts and audit reports, and Diet comments and resolutions were used and reflected appropriately when formulating the budget, so the level of was rated. of In the budget for FY2015, as well as promoting powerful measures to address the various challenges that Japan faces, including regional revitalization and child-rearing support, the MOF conducted a review of all areas of the budget with no exceptions, including social security, and succeeded in setting priorities and achieving greater efficiency in expenditure. As a result of this, it put together a budget that achieved compatibility between economic revitalization and fiscal consolidation, so the level of in regard to all measurement was rated. Accordingly, these measures were rated. Policy 1-1-2: PR activities Policy1-1-2-B-1: Implementation of PR activities The MOF will actively engage in briefings and other PR activities. The MOF will hold lectures and briefings for universities and local governments, etc. about the status of public finances.

4 This is to ensure that the MOF fulfills its duty of accountability to the populace in relation to public finances. ( the level of rating) In FY2014, the MOF was proactive in going to visit universities and local government bodies, etc. across Japan to carry out PR activities in the form of lectures and briefings about the status of public finances, so the level of was rated. ) Policy1-1-2-B-2: Enabling budget request estimates, etc. to be viewed on the MOF website The MOF will take steps to ensure that the budget request estimates and policy evaluation reports published on each ministry and agency s website can be viewed on the MOF s own website as quickly as possible. The MOF has placed links to the budget and policy evaluation pages in the About MOF section of the MOF homepage, enabling visitors to quickly peruse budget request estimates and policy evaluation reports. This is to ensure that the viewpoint of taxpayers is taken into account in budget formulation and to increase the efficiency of the budget. ( the level of rating) This information can now be accessed quickly from the MOF homepage, so the level of was rated. of In FY2014, the MOF strove to inform as many students and other members of the public as possible about the current status of public finances, initiatives aimed at fiscal consolidation, and the Comprehensive Reform of Social Security and Tax, as well as challenges that the country faces in these areas. To this end, the MOF visited a large number of universities and local government bodies, etc. to give lectures and briefings about these matters. Moreover, the MOF strove to provide easily accessible, user-friendly information about how budgets are allocated and whether they were used for appropriate purposes. To this end, the MOF placed links to the budget and policy evaluation pages on the MOF homepage, enabling visitors to quickly peruse budget request estimates and policy evaluation reports. Thus, as the level of in regard to all measurement was rated, these measures were rated.

5 Results of Evaluation of Policy Goal 1-1 of Policy Goal (Initiatives aimed at prioritized allocations of budget) In FY2014, the MOF drafted a supplementary budget to add the funds required to implement the Immediate Economic for Extending Virtuous Cycles to Local Economies, allocating funds as a priority to three fields: (1) support for consumers and business operators affected by the current economic climate, etc.; (2) revitalization of regions through effective initiatives for addressing the structural challenges they face; and (3) action to address disasters and crises, including accelerated recovery and reconstruction after disasters. In drafting the budget for FY2015, as well as promoting powerful measures to address the various challenges that Japan faces, including regional revitalization and child-rearing support, the MOF is conducting a review of all areas of the budget with no exceptions, including social security reform, in order to set priorities and achieve greater efficiency in expenditure. Primary balance expenditure (expenditure from the central government s General Account less government debt servicing costs) is trillion yen When government debt servicing costs of trillion yen are added to this, the total for the General Account stands at trillion yen. On the other hand, looking at income, having striven to make appropriate estimates of tax revenue, the MOF forecasts that income from taxation, etc. will reach trillion yen, an increase of trillion yen over the initial budget amount for the previous fiscal year, while income from public bonds is trillion yen. As a result of these initiatives, the MOF has succeeded in achieving an improvement of 4.6 trillion yen in the primary balance, surpassing the target of achieving an improvement of at least 4 trillion yen in each fiscal year set in the Medium-term Fiscal Plan, and has also reduced the value of new government bond issuance by 4.4 trillion yen. As such, the target is deemed to have been achieved in relation to initiatives aimed at prioritized allocations of budget. (PR activities) The MOF has placed links to the budget and policy evaluation pages in the About MOF section of the MOF homepage, enabling visitors to quickly peruse budget request estimates and policy evaluation reports. In addition, with the aim of making the budget drafting process more transparent and visible so that people at all levels of society understand Japan s fiscal situation, the MOF is actively undertaking PR activities focused on our nation s public finances. As such, the target is deemed to have been achieved in relation to PR activities. Taking into account the fact that all of the measures were rated s: Goal achieved, as described above, s in this area were rated. Policy Analysis (Necessity, effectiveness, efficiency, etc.) The MOF s efforts to promote greater efficiency and qualitative improvements in public finances through prioritized allocations of budget are based on such government policies as the Basic Principles of FY2015 Budget Formulation and are tremendously significant from the perspective of efforts to achieve compatibility between economic revitalization and fiscal consolidation. In drafting the budget for FY2015, the MOF has striven to undertake prioritized allocations as described above in order to ensure that budgetary funds are allocated effectively. In addition, it is striving to achieve greater efficiency in the budget by ensuring that final accounts, audit reports, and the results of the budget implementation surveys are reflected and the outcomes of policy evaluations utilized appropriately when the budget is drafted. (Relationship to the FY2014 administrative project review) In light of findings by external experts, system availability has been added as an indicator, in addition to the existing of targets and outcomes, in order to achieve even greater operational efficiency and rationalization. Moreover, as equipment updates were scheduled for FY2015 under lease contracts associated with the operational environment for servers, etc., the MOF took this opportunity to review the system configuration and achieved cost reductions in the budget request for FY2015 (sum reflected: million yen). (Project No. 003) Departments responsible Budget Bureau (Co-ordination Division, Fiscal Division, Research Division, Budget Examiner,Director for Fiscal Affairs, Policy Evaluation and Expenditure Review) Timing of policy evaluation June 2015

6 Policy Goal 1-2: Maintain necessary government revenue General outline of the goal The foundation for ensuring sound finances is a philosophy that, as a general rule, aims to meet fiscal demand using tax revenue and other sources rather than depending on bonds and loans (the no-loan policy; Public Finance Act). Of these, tax revenue consists of tax receipts from domestic taxation, among other revenue. In formulating the budget for each fiscal year, the MOF strives to provide an appropriate estimate of tax revenue, based on such figures as actual taxation identified at that stage, as well as relating to the Economic Outlook and Basic Stance for Economic and Fiscal Management. Moreover, in future, the MOF will continue to disclose information concerning such matters as its estimates of tax revenue via publications including Tax and Stamp Revenues, and will strive to improve its accountability. Looking next at other revenues, which are government revenues other than tax revenue and bond revenue, the MOF will work to secure such revenues to the maximum extent possible under the current extremely severe fiscal situation. The MOF will also work to prepare appropriate estimates based on recent performance for each item. And finally, the MOF will issue bonds as an unavoidable measure only when financial resources remain insufficient even after efforts to prioritize, reduce and rationalize expenditure. Policy1-2-1-B-1: Explanations concerning estimates of tax revenue, etc. As well as endeavoring to improve its accountability to the populace by disclosing information concerning tax revenue estimates in the publication Tax and Stamp Revenues and on its website, the MOF will strive to secure other forms of income, as far as possible, given the extremely harsh financial situation at present, and will endeavor to formulate appropriate estimates based on actual figures in recent years. Level of achieve ment ) The MOF disclosed information concerning such matters as its estimates of tax revenue via publications including Tax and Stamp Revenues, as well as its website. In addition, the MOF strove to formulate appropriate estimates of other forms of income and secured non-tax receipts of 5.0 trillion yen in the budget for FY2015. The aim of this is to improve the MOF s accountability to the populace by disclosing information concerning tax revenue estimates, via such means as the publication Tax and Stamp Revenues, and to strive to secure other forms of income, as far as possible, as well as formulating appropriate estimates. 〇 ( the level of rating) The MOF disclosed information concerning such matters as its estimates of tax revenue via publications including Tax and Stamp Revenues, as well as its website. In addition, with regard to other forms of income, the MOF strove to secure as great a sum in non-tax receipts as possible (5.0 trillion yen in the budget for FY2015) and used recent figures for other forms of income received to formulate appropriate estimates. Accordingly, the level of was rated.

7 ) Policy B-2: Reducing the value of new JGBs issued, in accordance with the Medium-term Fiscal Plan In accordance with the Medium-term Fiscal Plan, the MOF will do its utmost to ensure that the value of new JGBs issued does not exceed the value of those issued during the previous fiscal year. At 4.4 trillion yen, the value of new government bond issuance was substantially lower than the previous fiscal year (the thirdlargest reduction ever, and the first time that the reduction had been in excess of 4 trillion yen since the initial budget for FY2007), while the reliance on bonds fell to 38.3% (the first time that it had dropped below 40% since the initial budget for FY2009). Level of achieve ment This is to maintain discipline in public finances and ensure confidence in bonds. ( the level of rating) In accordance with the Medium-term Fiscal Plan, the MOF succeeded in reducing the value of new government bond issuance substantially compared with the previous fiscal year, bringing it down to around 4.4 trillion yen, so the level of was rated. Results of Evaluation of Policy Goal 1-2 of Policy Goal Following on from the supplementary budget for FY2014, the MOF continued its efforts in the budget for FY2015 (General Account), striving to make appropriate estimates of tax revenue (54.5 trillion yen in the budget for FY2015) and to secure as great a sum in non-tax receipts as possible (5.0 trillion yen in the budget for FY2015). As a result, tax revenue exceeded income from public bonds for the third consecutive year. Thus, as the level of in regard to all measurement was rated, these measures were rated. Departments responsible Budget Bureau (Co-Ordination Division); Tax Bureau(Cordination Division) Timing of policy evaluation June 2015

8 Policy Goal 1-3: Improve transparency of enforcement of the budget, and maintain the proper enforcement of the budget. General outline of the goal The heads of respective ministries and agencies have responsibility and authority to execute the national budget, while the MOF is making requests so that budget execution is conducted economically and efficiently by each ministry and agency in line with the stipulations of laws and regulations. In order to bring even further efficiency to the budget, it is necessary to improve transparency in budget execution and strengthen the functions of checking and taking actions in the Plan-Do-Check-Act cycle. From such viewpoint, this policy goal has been set up. ( for achieving the goal) Policy1-3-1:Enhance the disclosure of information concerning budget implementation Policy1-3-2:Ensure smooth, efficient budget implementation Policy1-3-3:Implement budget implementation surveys Policy1-3-4:Request that each ministry and agency ensure the proper, efficient implementation of its budget ) Policy1-3-1:Enhance the disclosure of information concerning budget implementation Policy1-3-1-B-1: Status of regular checks of disclosure of information concerning budget implementation The MOF will conduct regular checks concerning the disclosure of information concerning budget implementation by each ministry and agency. The MOF conducted regular checks concerning the disclosure of information concerning budget implementation by each ministry and agency. This is to maintain a situation in which information about budget implementation disclosed by each ministry and agency can be viewed on the MOF website. ( the level of rating) In order to ensure transparency in budget implementation, with the assistance of other ministries and agencies, the MOF made available on its own website the information about budget implementation published regularly on the websites of each ministry and agency and carried out regular checks of the disclosure status of this information. Accordingly, the level of was rated. of In order to ensure transparency in budget implementation, with the assistance of other ministries and agencies, the MOF made available on its own website the information about budget implementation published regularly on the websites of each ministry and agency. Thus, as the measurement indicator was rated, this measure was rated s: Goal achieved. Policy 1-3-2: Ensure smooth, efficient budget implementation of As there is a statutory requirement to request the approval of the Minister of Finance for budget implementation, the MOF strove to ensure smooth, efficient budget implementation by utilizing approved carried-over expenses, the act of bearing liabilities with national treasury funds, and approved budgetary transfers and diversions, pursuant to the provisions of the relevant legislation. Moreover, in order to facilitate steady progress with reconstruction in the aftermath of the Great East Japan Earthquake, the MOF continues to streamline the administrative procedures for bringing forward balances due to unforeseeable circumstances. As described above, the MOF ensured smooth, efficient budget implementation, so this measure was rated s: Goal achieved. (Note) No measurement indicator was set for this measure.

9 ) Policy 1-3-3: Implement budget implementation surveys Policy1-3-3-B-1: Implement budget implementation surveys The MOF will steadily conduct budget implementation surveys and will promptly publish the results and details concerning their reflection in the budget. The MOF steadily conducted budget implementation surveys and promptly published the results and details concerning their reflection in the budget. This is to ascertain the reality of budget implementation and strive for greater efficiency in the budget. ( the level of rating) To achieve greater efficiency in the budget, the MOF steadily conducted surveys while seeking to improve their quality, by such means as incorporating expert knowledge and proactively conducting on-site surveys. Moreover, the MOF published the survey results within an appropriate timeframe and promptly published details concerning their reflection in the budget once the budget had been finalized, so the level of was rated. of To achieve greater efficiency in the budget, the MOF steadily conducted surveys while seeking to improve their quality, by such means as incorporating expert knowledge and proactively conducting on-site surveys. Moreover, the MOF published the survey results within an appropriate timeframe and promptly published details concerning their reflection in the budget once the budget had been finalized. Thus, as the measurement indicator was rated, this measure was rated s: Goal achieved. Policy 1-3-4: Request that each ministry and agency ensure the proper, efficient implementation of its budget of The MOF held various conferences and training sessions, including a conference for Local Finance Bureau staff involved in administering the settlement of accounts for balances brought forward and training sessions for staff handling accounting tasks. In addition, to enhance the transparency of contracts, the MOF published information concerning the contracts concluded by ministries and agencies in FY2013 in the Statistical Overview of the Number and Value of Contracts and the Statistical Overview of Single-tendering Contracts, and strove to make single-tendering contracts more appropriate. As described above, the MOF called on each ministry and agency to ensure the proper, efficient implementation of its budget, so this measure was rated s: Goal achieved. (Note) No measurement indicator was set for this measure. Results of Evaluation of Policy Goal 1-3 of Policy Goal Taking into account the fact that all of the measures were rated s: Goal achieved, as described above, s in this area were rated. Departments responsible Budget Bureau (Co-ordination Division, Fiscal Division, Legal Division); Accounting Center Timing of policy evaluation June 2015

10 Policy Goal 1-4: Disclose the information of the nation s fiscal conditions accurately by compiling the settlement of accounts General outline of the goal The settlement of accounts is not normative as budget formulation but functions as a report to the public and the Diet concerning how the national government has executed the budget based on the Fiscal Act, the Public Accounting Act and other laws. Based on such characteristics, the MOF will endeavor to settle accounts accurately in an easy-to-understand manner in order to deepen people s awareness and understanding of national finances. Efforts will be made to reflect the resolutions and opinions on the settlement presented at the Diet sessions properly in budget formulation and execution. ( for achieving the goal) Policy 1-4-1: Report on the status of budget use and treasury income and expenditure, and provide an overview of the final accounts Policy 1-4-2: Ensure early submission of the FY2013 final accounts for revenue and expenditure Policy 1-4-1: Report on the status of budget use and treasury income and expenditure, and provide an overview of the final accounts (quantitative ) Policy1-4-1-A-1: Status of regular publication of the status of budget use, treasury income and expenditure, and the overview of the final accounts FY FY2010 FY2011 Target figure Status of budget use: 5 treasury income and expenditure: 15 overview of the final accounts: annually Status of budget use: 5 treasury income and expenditure: 15 overview of the final accounts: annually FY2012 Status of budget use: 5 treasury income and expenditure: 15 overview of the final accounts: annually FY2013 Status of budget use: 5 treasury income and expenditure: 15 overview of the final accounts: annually FY2014 Status of budget use: 5 treasury income and expenditure: 15 overview of the final accounts: annually The target has been set in order to promote timely and appropriate reporting to the populace and the Diet concerning the status of budget use, and treasury income and expenditure, which are published over the course of the fiscal year, as well as the overview of the final accounts, which discloses budget implementation performance. ( the level of rating) The MOF reported the status of budget use, treasury income and expenditure, and the overview of the final accounts to the public and the Diet in a timely and appropriate manner, so the level of was rated. of The MOF reported the status of budget use, treasury income and expenditure, and the overview of the final accounts to the public and the Diet in a timely and appropriate manner. Thus, as the measurement indicator was rated, this measure was rated s: Goal achieved.

11 Policy 1-4-2: Ensure early submission of the FY2013 final accounts for revenue and expenditure Policy1-4-2-A-1: Date of delivery of the settlement of revenue and expenditure to the Board of Audit of Japan FY Target FY2010 Around Sept 10, 2010 FY2011 FY2012 Around Sept Around Sept 10, , 2012 FY2013 Around Sept 10, 2013 FY2014 Early Sept 2014 figure In 2003, the House of Councillors requested that the final accounts be submitted to the Diet around November 20 in the subsequent accounting year, so, given that the Board of Audit requires around two months to audit the final accounts, the MOF has set early September as the target. ( the level of rating) The MOF submitted the FY2013 final accounts for revenue and expenditure to the Board of Audit on September 2, 2014, in an effort to comply with the Diet s request for early submission (around November 20 in the subsequent accounting year), so the level of was rated. (quantitative ) Policy1-4-2-A-2: Date of submission to the Diet of the final accounts for revenue and expenditure FY FY2010 FY2011 FY2012 Target Around Nov Around Nov Around Nov 20, , , 2012 FY2013 FY2014 Around Nov Around Nov 20, , 2014 figure The MOF submitted the FY2013 final accounts for revenue and expenditure to the Diet on November 18, 2014, in compliance with the Diet s request for early submission (around November 20 in the subsequent accounting year). To facilitate ex post facto evaluation by enabling each policy s budget and final accounts to be compared against its outcomes, the MOF compiled the FY2013 statement of final accounts in such a way as to ensure that the units for items displayed on budget documents and statements of final accounts (paragraphs and items) correspond to the units used in policy evaluation, in principle. Moreover, when compiling the Explanation of Final Accounts, which is provided as a reference to aid the auditing of the accounts, the MOF sought to make it user-friendly, requesting that each ministry and agency provide materials that would assist in analysis and evaluation, such as providing quantitative data about administrative and project plans and outcomes achieved, as well as the implementation status of major long-term plans, as far as possible. Thus, as all measurement were rated, these measures were rated s: Goal achieved.

12 of The MOF submitted the FY2013 final accounts for revenue and expenditure to the Diet on November 18, 2014, in compliance with the Diet s request for early submission (around November 20 in the subsequent accounting year). The MOF prepared the FY2012 settlement of accounts so that units for indicated items in budgets and the settlement of accounts (paragraphs, items) and units of policy evaluations corresponded to each other, as a general rule, in order to facilitate ongoing comparison and contrast of budgets and settlements of accounts for each policy and its results, thereby facilitating ex-post evaluation. Furthermore, regarding the explanation of the settlement of accounts that the MOF prepares as a source of reference in deliberations concerning accounts settlement, the MOF instructed all ministries and agencies to present items that contribute to various analyses and evaluations, and has strived to prepare easily-understood materials. This includes actively incorporating quantitative data on administrative and operational plans and performance, the status of implementation of major long-term plans, and other information whenever possible. Thus, as all measurement were rated, these measures were rated s: Goal achieved. Results of Evaluation of Policy Goal 1-4 of Policy Goal Taking into account the fact that all of the measures were rated s: Goal achieved, as described above, s in this area were rated. Departments responsible Timing of Budget Bureau (Fiscal Division) June 2015 policy evaluation

13 Policy Goal 1-5: Appropriately implement administrative tasks relating to local government revenue and expenditure, including the formulation of local government finance programs, as well as those relating to fiscal transfers between the national and local governments General outline of the goal In FY2014, revenue shortages are expected to decrease both in the national and local governments thanks to increases in national and local tax revenue. However, Japan s fiscal situation still remains extremely severe. It will be vital for the MOF to coordinate with the Ministry of Internal Affairs and Communications regarding administrative tasks relating to local government finance, as the latter oversees the formulation of local government finance programs, as well as the local tax system and local government bonds. Under such circumstances, the MOF will appropriately and smoothly execute administration pertaining to local revenue and expenditure and to fiscal transfer between the national and local governments in order to oversee national financial affairs. Additionally, the MOF will take proper measures in line with the a Mid-term Fiscal Plan with the aim of achieving the fiscal consolidation targets of decreasing the primary deficit of the national and local governments to GDP ratio by 50% from the ratio in FY2010 by no later than FY2015 and achieving a primary surplus by no later than FY2020. ( for achieving the goal) Policy 1-5-1: Reform local income and expenditure Policy 1-5-2: Rectify the uneven distribution of sources of tax revenue between regions Policy 1-5-1: Reform local income and expenditure Policy1-5-1-B-1: Reform local income and expenditure In order to ensure that the administration of local income and expenditure and financial transfers between the central and local governments is carried out appropriately and smoothly, from the perspective of the overall coordination of the government s financial affairs, the MOF will promote reforms of matters relating to local income and expenditure, such as the revision of special expenditure categories and the special addition to tax allocations to local governments. ) The government promoted reforms of matters relating to local income and expenditure, reducing the special expenditure categories and the special addition to tax allocations to local governments. This is because the Basic Principles of the Budget Formulation for FY2014 (approved by the Cabinet on December 12, 2013) stipulates that the local government administration and finance system must switch from the post-lehman Crisis emergency response mode back to normal mode. Accordingly, the government will promote reforms of matters relating to local income and expenditure, such as the revision of special expenditure categories and the special addition to tax allocations to local governments. ( the level of rating) The government promoted reforms of matters relating to local income and expenditure, including reducing the special expenditure categories and the special addition to tax allocations to local governments, so the level of was rated.

14 of Having coordinated with the Ministry of Internal Affairs and Communications, the MOF has taken all possible measures in the FY2015 Local Government Finance Program to prepare for an earthquake disaster, introducing a special local allocation tax for post-disaster reconstruction. In addition, in line with the Basic Principles of FY2015 Budget Formulation, the MOF has reduced the tax allocations to local governments, etc. (on a General Account basis) for the fifth consecutive year, cutting the allocations by billion yen from the previous fiscal year by such means as revising the special addition with reference to increases in local tax revenue, etc. Thus, as the measurement indicator was rated, this measure was rated s: Goal achieved. ) Policy 1-5-2: Rectify the uneven distribution of sources of tax revenue between regions Policy B-1: Rectify the uneven distribution of sources of tax revenue between regions The MOF will revise its approach to local corporation tax and formulate measures to rectify the uneven distribution of sources of tax revenue between regions, while taking local government fiscal management into consideration. Taking advantage of the corrective effect of using corporate inhabitant tax to cover part of the tax allocation to local governments, a measure introduced in the FY2014 tax reform, the MOF introduced a new expenditure category in the FY2015 Local Government Finance Program, namely the expenditure on projects to enhance towns, people, and jobs category. This is because the Basic Principles of the Budget Formulation for FY2014 (approved by the Cabinet on December 12, 2013) stipulates regarding the local government administration and finance system that the government will revise its approach to local corporation tax and formulate measures to rectify the uneven distribution of sources of tax revenue between regions, while taking local government fiscal management into consideration. ( the level of rating) Taking advantage of the corrective effect of using corporate inhabitant tax to cover part of the tax allocation to local governments, a measure introduced in the FY2014 tax reform, the MOF introduced a new expenditure category in the FY2015 Local Government Finance Program, namely the expenditure on projects to enhance towns, people, and jobs category. Thus, as it formulated measures to rectify the uneven distribution of sources of tax revenue between regions, the level of was rated. of The measurement indicator was rated, because, taking advantage of the corrective effect of using corporate inhabitant tax to cover part of the tax allocation to local governments, a measure introduced in the FY2014 tax reform, the MOF introduced a new expenditure category in the FY2015 Local Government Finance Program, namely the expenditure on projects to enhance towns, people, and jobs category. Accordingly, this measure was rated s: Goal achieved.

15 Results of Evaluation of Policy Goal 1-5 of Policy Goal In the FY2015 local finance plan, as a result of coordination with the MIC, the MOF made all possible efforts to respond to the Great East Japan Earthquake, including introducing the Special Tax Allocation for Reconstruction from the Earthquake. Moreover, the MOF achieved a reduction in distributions of local allocation tax, etc. (on a general account basis)for the fifth consecutive year, cutting the figure by billion yen compared to the previous fiscal year, in line with the Basic Principles of the Budget Formulation for FY2015.All of these measures were rated s: Goal achieved, because, taking advantage of the corrective effect of using corporate inhabitant tax to cover part of the tax allocation to local governments, a measure introduced in the FY2014 tax reform, the MOF introduced a new expenditure category in the FY2015 Local Government Finance Program, namely the expenditure on projects to enhance towns, people, and jobs category. Accordingly, s in this area were rated. Departments responsible Budget Bureau (Budget Examiner, Director for Legal Affairs, Director for Inter-Division Affairs, Director for Fiscal Affairs, Policy Evaluation and Expenditure Review); Tax Bureau (Co-Ordination Division);Financial Bureau (Director for Fiscal Investment and Loan Appropriation) Timing of policy evaluation June 2015

16 Policy Goal 1-6: Establish and properly operate the fair, efficient and transparent systems of public finance and accounting General outline of the goal The philosophy underpinning the current system of public finance and accounting is that (1) authority for dealing with government finances must be exercised on the basis of resolutions by the Diet; (2) fiscal soundness must be ensured; and (3) expenditure by the government must be fair and proper. In order to increase the public s trust in public finance, the MOF will work on reforming not only the General Account, but also special accounts from the perspectives of necessity, effectiveness, and efficiency, in accordance with the Basic Principles of the Budget Formulation for FY2014. ( for achieving the goal) Policy 1-6-1: Prepare and publish Japanese Government Financial Statements Policy 1-6-2: Promote the reform of special accounts (quantitative ) Policy 1-6-1: Prepare and publish Japanese Government Financial Statements Policy1-6-1-A-1: Publication dates of Japanese Government Financial Statements (General Account and special accounts) FY FY2010 FY2011 FY2012 FY2013 Target figure Late June Late June Late May 2012 Late January Late January FY2014 Late January The report entitled Further Development of the Basis for Public Sector Accounting: Interim Report (June 14, 2006, Fiscal System Council) recommends that it is necessary to consider upgrading systems to allow financial statements to be prepared and published as soon as possible, so that more effective use can be made of them, with a view to conducting more efficient, appropriate financial activities, so the date of publication has been set as the target in order to measure efforts to achieve this goal. ( the level of rating) The statements were published on January 30, 2015, meeting the target of publication in late January 2015, so the level of was rated. ) Policy B-1: Preparation and publication of materials concerning Japanese Government Financial Statements that are easy for citizens to understand The pamphlets Key Points in Japanese Government Financial Statements and Outline of Financial Statements by Ministry use diagrams to explain the government s financial affairs to citizens in a manner that is easier to understand. The MOF published user-friendly explanatory materials with diagrams, enhancing the pamphlet Key Points in Government Financial Statements with a new commentary section to make it easier for the public to understand.

17 The pamphlets Key Points in Government Financial Statements and Outline of Financial Statements by Ministry use diagrams to explain the government s financial affairs to citizens in a manner that is easier to understand. ( the level of rating) The MOF published user-friendly explanatory materials with diagrams, enhancing the pamphlet Key Points in Government Financial Statements with a new commentary section (including a commentary on the difference between assets and liabilities based on cumulative sums) to make it easier for the public to understand. Accordingly, the level of was rated. of From the perspective of fully utilizing Japanese Government Financial Statements for budgetary debates at the Diet, efforts have been made to prepare and publicize them by the end of January of the next fiscal year. The MOF publicized the financial statements for FY2013 on January 31, 2015, on its website, and the target was achieved. Upon publication of such data, the MOF also prepares a pamphlet to explain the structure and annual changes of national assets and debts, as well as operational costs, for better understanding of the public. Furthermore, in addition to reviewing the content of the financial statements prepared by each ministry and agency individually to ensure that accurate information is disclosed to the public, the MOF provided advice concerning the preparation of the pamphlet Outline of Financial statements by Ministry, which was published in January, as it was in the previous fiscal year. Thus, as all measurement were rated, these measures were rated s: Goal achieved. Policy 1-6-2: Promote the reform of special accounts of The special accounts that were subject to the reform were abolished and integrated, following the entry into force of the Act for Partial Revision of the Special Account Act (Act No.76 of 2013) on April 1, Thus, the reform of special accounts was completed. (Note) No measurement indicator was set for this measure. Results of Evaluation of Policy Goal 1-6 of Policy Goal Taking into account the fact that the performance indicator targets were achieved because all of the measures were rated s: Goal achieved, and that both measures are being steadily implemented, as described above, s in this area in FY2014 were rated. Departments responsible Timing of Budget Bureau (Legal Division) June 2015 policy evaluation