Fiscal Policy in Japan

Transcription

1 Fiscal Policy in Japan - Issues and Future Directions- June 10th, 2015 Ministry of Finance

2 General Government Gross Debt and Financial Balances (International Comparison) (%) General Government Gross Debt Lehman Shock Japan (%) 5.0 General Government Financial Balances Lehman Shock Germany 150 Italy Canada Italy 120 France U.S U.S. France 90 U.K. Canada U.K. Japan Germany (CY) (CY) (Source) Based on the data included in Economic Outlook 96 issued by the OECD in November 2014, and not reflecting the data for the budget for FY2015 (Note) Figures represent the general government-based data (including the central/local governments and the social security funds). 1

3 Relationship between Social Security Expenditures and the Tax and Social Security Contributions Ratio in Major Advanced Countries 40.0 Government Social Security Expenditure (as percentage of GDP) United States Korea Japan Ireland Slovak Republic Switzerland Finland Sweden Greece Slovenia Germany United Kingdom Netherlands Spain Portugal Luxembourg Czech Republic Hungary Poland Estonia Iceland New Zealand Israel Canada Austria Italy Norway France Belgium Denmark Tax and Social Security Contributions Ratio (as percentage of GDP) (Source) Tax and Social Security Contributions Ratio: OECD National Accounts, Revenue Statistics, Cabinet Office National Accounts etc. Social Security Expenditure: OECD Stat Extracts National Accounts. (Note 1) The figures represent the general government-based data (including the central and local governments and the social security funds). (Note 2) National Burden Ratio : For other countries, the figures are actual for For Japan, the figure for FY2011 is actual. For New Zealand, the figure for 2005 is actual. For Canada, the figure for 2006 is actual. (Note 3) Social Security Expenditure : For other countries, the figures for 2011 are actual. For Japan, the figure for FY2011 is actual. For New Zealand, the figure for 2005 is actual. For Canada, the figure for 2006 is actual. 2

4 Trends in Japan s Population Structure Population(ten thousand ) Actual results (National Census etc.) Projection (2012) (Japan s Demographic Composition in the Future ) Proportion of working-age (aged 15-64) 12,806 11, % (2010) 3,685 Aged 65 and over 8,674 Proportion of working-age 50.9% Aged % (2010) 6,773 3,464 Proportion of aged 65 and over 39.9% Proportion of aged 65 and over fertility rate 4,418 Aged 14 and under fertility rate (2010) 1, (Sources) Ministry of Internal Affairs and Communication National Census and Population Projection, National Institute of Population and Social Security Research, Japan s Demographic Composition in the Future (estimation as of January 2012), Ministry of Health, Labor and Welfare Vital Statistics 3

5 Demographic Change <Ratio of People Older than 65 years to the Population> <Japan s demographic composition> (%) (S45) 2015 (H27) 2025 (H37) France: (H52) Japan Germany France U.K U.S Japan: 26.8 Germany: 21.4 United Kingdom: 18.1 United States: 14.7 Population (thousand) / component ratio 9, (6.3%) 5,608 (57.1%) 12,361 1,489 (12.0%) 12,693 7,622 (61.7%) 7,888 (62.1%) 12,695 2,204 (17.4%) 3,308 (26.1%) 7,183 (56.6%) 12,066 3,657 (30.3%) 6,559 (54.4%) 9,708 3,768 (38.8%) 4,643 (47.8%) Age 65 and over Age ,602 (36.6%) 3,249 (26.3%) 2,601 (20.5%) 2,204 (17.4%) 1,849 (15.3%) 1,297 (13.4%) Age 19 and under (Source) Japan : National Census (Ministry of Internal Affairs and Communications) : Japanese Future Demographic Projections (National Institute of Population and Social Security Research) (January, 2012) Other countries: World Population Prospects: the 2012 Revision (United Nations) (Source) Demographic composition from 1965 to 1990 according to the National census conducted by the Ministry of Internal Affairs and Communications, and data for 2014 onwards according to Japan s demographic composition in the future (estimation as of January 2012) issued by the National Institute of Population and Social Security Research. 4

6 Long-term Projections on Japanese Public Finances (Fiscal System Council, April 28) <Projection Methodologies and Objectives> Following the projection methodologies by the European Commission, we analyze i) the impact of demographic changes on age-related expenditure, and ii) the required fiscal adjustment (Sustainability Gap Indicators : S1 and S2) to maintain fiscal sustainability in the long term. (Note 1) In the Fiscal Sustainability Report 2012 by the EC, the sustainability gap indicators, S1 and S2, are calculated against the baseline (assuming unchanged policies). S1 : The fiscal adjustment required, in terms of a steady improvement in the structural primary balance, to be made between 2015 and 2020 (six years), to bring the general government debtto-gdp ratio to 60% in S2 : The fiscal adjustment required, in terms of a steady improvement in the structural primary balance, to be made in 2015, to stabilize the general government debt-to-gdp ratio over an infinite horizon. (Note 2)With regard to S1, We calculate the fiscal adjustment required to bring the general government debt-to-gdp ratio to 100% in (Note 3) Age-related expenditure is expenditure whose levels per capita differ depending on cohort such as social security expenditure of pensions, health care, long-term care, and unemployment benefits, and education expenditure. Projections are made reflecting demographic changes and spending per capita in each cohort based on the current policies. (Note 4) Macroeconomic assumptions FY2013 to FY2023 : Cabinet Office (Jan. 2014), Economic and Fiscal Projections for Medium to Long Term Analysis (Economic Revival Case) FY2024 to FY2060 : Economic growth rate (2 cases): (i) real 1.0% nominal 2.0%, (ii) real 2.0% nominal 3.0% (based on the government s Basic Policies for Economic and Fiscal Management and Reform) Nominal long-term interest rate: 3.7% (the assumption used in the 2009 examination of long-term pension financing by the Min. of Health, Labour, and Welfare) 5

7 Long-term Projections on Japanese Public Finances (Fiscal System Council, April 28) Projection Results (1) Age-related expenditure --Impact of aging <Pop. aged 65 and over, Age-related expenditure> (% of GDP) < Components of age-related expenditure> (% of GDP) 40% 39.9% Public pensions 10.2% Pop. Aged 65 and over 10% 10.3% 9.9% 35% Health care 6.5% Long-term care 30% 5% 5.8% 29.6% 25% 23.0% 4.4% Education, Unemployment benefits etc. 3.7% 22.6% Age-related expenditure 1.5% 20% (FY) 0% (FY) (Note)Solid lines in the above figures are numbers in the case of economic assumptions after FY2024 of 2.0% real economic growth rate, 3.0% nominal economic growth rate, and 3.7% nominal long-term interest rate. 6

8 Long-term Projections on Japanese Public Finances (Fiscal System Council, April 28) Projection Results (2) Required fiscal adjustment (Case of 2.0% real economic growth and 3.0% nominal economic growth) Fiscal System Council (May 30, 2014) points out Achievement of a primary surplus in FY2020 is a starting point, not a final goal of fiscal consolidation. <Primary Balance (General Government)> <Debt Outstanding (General Government)> 10% PB after fiscal adjustment of S1 in Case2 < 一般政府の基礎的財政収支 ( 対 GDP 比 )( イメージ )> PB after fiscal adjustment of S1 in Case1 Baseline1 5% 11.94% 8.20% 600% 0% 500% Baseline2 400% 5% Baseline2 Baseline1 300% 200% Debt/GDP after fiscal adjustment of S1 in Case2 Debt/GDP after fiscal adjustment of S1 in Case1 10% 100% (FY) (FY) 7

9 Fiscal Consolidation Targets ( Medium-Term Fiscal Plan (Approved by the Cabinet on August 8, 2013)) By FY2015 The Government aims to halve the primary deficit of the national and local governments to GDP ratio (-3.3%) by FY2015 from the ratio in FY2010 (-6.6%) By FY2020 The Government aims to achieve a primary surplus Thereafter The Government will seek to steadily reduce the public debt to GDP ratio 8