See. Annual expenditure (note) 48,996 49, (0.8%) Personnel and food provisions

Transcription

1 Section 4 Defense-Related Expenditures 1 Overview of Defense-Related Expenditures Defense-related expenditures include for improving defense capabilities and maintaining and managing the SDF, as well as necessary for the implementation of measures against neighborhood affairs in the vicinity of defense facilities. Defenserelated expenditures have been on a hike for 6 years in a row since FY2014, including the duration of the current MTDP under which defense expenditures are set to increase by 0.8% in real average over the course of five years. In comparison with the previous fiscal year, defenserelated expenditures for FY2018 were increased by 39.2 billion yen to trillion yen. When including related to Special Action Committee on 2 Breakdown of Defense-Related Expenditures Defense-related expenditures are broadly classified into personnel and food provision, which covers items such as wages and meals for SDF personnel, and material, which finance the repair and maintenance of equipment, the purchase of fuel, the education and training of SDF personnel and the procurement of equipment and the others. Material Okinawa (SACO) and the U.S. Forces realignmentrelated (the portion allocated for mitigating the impact on local communities) and expense for the introduction of new government aircraft, defense-related expenditures were increased by 66 billion yen from the previous fiscal year to trillion yen. Additionally, the supplementary budget for FY2018 contains an appropriation of billion yen as necessary for securing stable operations of the SDF, which includes responding to ballistic missile attacks. Fig. II (Comparison Between Budget and FY2018 Budget) Fig. II (Trend in Defense-Related Expenditures [Initial Budget] Over the Past 15 Years) are further classified into obligatory outlay, 1 which are paid based on contracts concluded in previous fiscal years, and general material, which are paid under current-year contracts. Material are also referred to as program, and since general material include repair costs for equipment, education and training for personal, Fig. II Comparison Between Budget and FY2018 Budget Category (100 million yen) Fiscal YOY growth ( indicates negative growth) Annual expenditure (note) 48,996 49, (0.8%) food provisions 21,662 21, (0.9%) Material 27,334 27, (0.7%) Future obligation (note) 46,589 49,221 2,632 (5.6%) New contracts 19,700 19, (1.2%) Existing contracts 26,889 29,283 2,393 (8.9%) Note: Does not include SACO-related, U.S. Forces realignment-related (the portion allocated for mitigating the impact on local communities), and expense for the introduction of new government aircraft based on The Policy Concerning Government Aircraft (August 7, 2013 decision by the Review Committee on Government Aircraft). If these are included, the fi gures are 5,125.1 billion yen for and 5,191.1 billion yen for FY2018; and for future obligation, 4,872.6 billion yen for and 5,076.8 billion yen for FY2018. Figures may not add up to the total due to rounding. 1 In the build-up of defense capabilities, there are things that span multiple years. In these cases, the fi scal year in which the contract is concluded is different from the fi scal year in which the payment to the contractor is made. Therefore, the future maximum obligation is allocated to the budget as a contract resulting in Treasury obligation (type of budget that only grant an authority to incur obligations. The contracts can be concluded, although the payment cannot be made). Based on such budgeting, in principle in the fi scal year the construction is completed or the equipment is procured, necessary for payment are allocated as budget expenditure (type of budget that grant authorities to incur obligations and make payment. The contracts can be concluded and the payment can be made). Budget expenditure for payments incurred under contracts concluded in previous fi scal years is called obligatory outlay, while expenditure for the future fi scal years is termed future obligation concerning new contracts. 229 DEFENSE OF JAPAN 2018

2 Defense-Related Expenditures Section 4 Fig. II Trend in Defense-Related Expenditures Over the Past 15 Years (100 million) 50,000 49,388 49,000 48,760 48,297 48,221 48,607 48,996 48,000 47,000 46, , , , , ,826 46, , ,838 46, (FY) Note: The figures above do not include SACO-related, the U.S. Forces realignment-related (the portion allocated for mitigating the impact on local communities) and for the introduction of new government aircraft. Including these, total defense-related expenditures were as follows: 4,902.6 billion in FY2004, 4,856.0 billion yen in FY2005, 4,813.6 billion in FY2006, 4,801.3 billion in FY2007, 4,779.6 billion in FY2008, 4,774.1 billion in FY2009, 4,790.3 billion in FY2010, 4,775.2 billion in FY2011, 4,713.8 billion in FY2012, 4,753.8 billion in FY2013, 4,884.8 in FY2014, 4,980.1 billion in FY2015, 5,054.1 billion in FY2016, 5,125.1 billion in, and 5,191.1 billion in FY2018. Fig. II Relationship between Annual Expenditure and Future Obligation Concerning New s Personnel and food provisions (44.2%) Amount of future obligation When improving defense capabilities, it is common for work in areas like the procurement of equipment and the upgrading of facilities to be carried out over several years. Consequently, a procedure is undertaken whereby a contract that extends for multiple years is arranged (five years in principle), and the government promises in advance at the time of the agreement to make the payment at a fixed time in the future. Future obligation refers to the sum of money to be paid in the following year and beyond under such contracts, which extend for multiple years. Example: A case in which 10 billion yen of equipment is procured under a contract that runs for four years FY2018 paid in part (1 billion yen) General material FY2019 FY2020 FY2021 paid in part (1 billion yen) paid in part (2 billion yen) Future obligation (9 billion yen) Payment Remaining sum paid (6 billion yen) Obligatory outlay Amount of contract (10 billion yen) Existing contracts 2017 (35.6%) Future obligation Structure of Defense-related Expenditures Annual expenditure Defense-related expenditures are broadly classified into personnel and food provision and material (program ). Material (program ) Obligatory outlay General material (activity ) Expenses relating to wages for personnel, retirement allowance, meals in barracks, etc. Expenses relating to procurement; repair and upgrading of equipment; purchase of oil; education and training of staff; facilities improvement; barracks such as lighting, heating, water and supplies; technological research and development; cost-sharing for the stationing of USFJ; and related to measures to alleviate the burden on local communities hosting U.S. bases in Japan Expenses paid in FY2018 based on contracts made before Expenses paid in FY2018 based on contracts made in FY2018 General material (activity ) (20.1%) FY2018 Defense-related expenditures Material on contract basis New contracts and the purchase of fuel, they are referred to also as activity. The MOD terms this classification method as classification by. food provision as well as obligatory outlay, both of which are mandatory, account for 80% of the total defense-related budget. The remaining 20% of the budget includes spending for repairing equipment and for implementing measures to alleviate the impact on local communities hosting U.S. bases in Japan. As such, a high percentage Defense of Japan 230

3 Fig. II Breakdown of Defense-Related Expenditures (FY2018) R&D 2.1% Facility development 3.5% Base measures 9.0% Procurement of equipment, etc. 16.6% Other 1.6% By purpose of use 44.2% General materials 20.1% (9,949) [ 0.2%] Maintenance, etc. 23.0% Other 16.2% (7,982) GSDF 37.1% (18,310) of the budget is allocated for maintenance purposes. For this reason, the breakdown of the defense-related expenditures cannot be easily altered in a significant manner on a single-year basis. Fig. II (Relationship between Annual Expenditure and Future Obligation Concerning New s) food provision were increased by 18.7 billion yen from the previous fiscal year, while obligatory outlay for the year increased by 22.6 billion yen. General material decreased by 2.1 billion yen from the previous fiscal year. 2 s 35.6% (17,590) [1.3%] By expense 44.2% (21,850) [0.9%] Notes: 1. ( ) is the budget amount; unit: 100 million yen. 2. The above figure does not include SACO-related (5.1 billion yen), the U.S. Forces realignment-related (the portion allocated for mitigating the impact on local communities) (216.1 billion yen), and expense for the introduction of new government aircraft (31.2 billion yen). 3. Figures in square brackets [ ] indicate year-on-year growth rate (%). Fig. II (Breakdown of Defense-Related Expenditures FY2018) Reference 14 (Changes in Composition of Defense-Related Expenditures (Original Budget Basis) In addition to the annual budget expenditure, the amount of future obligations concerning new contracts also indicates payments for the following year and beyond (the amount of future obligation arising in the applicable fiscal year). In the build-up of defense capabilities, it is ASDF 23.6% (11,663) common to take multiple years from contract to delivery or completion, in areas such as the procurement of vessels, aircraft, and other primary equipment, as well as the construction of buildings such as aircraft hangars and barracks. Consequently, for such items, a procedure is undertaken whereby a multi-year contract is arranged, and it is promised in advance at the time of the contract that payments will be made in the following fiscal year and beyond (within five years, in principle). The sum of money to be paid in the following fiscal year and beyond, based on such a multi-year contract, is called the future obligation. The amount of future obligation concerning new contracts arising in FY2018 increased from the previous fiscal year by 23.8 billion yen (1.2%). Furthermore, if looked at on a contract basis, 3 which shows the scale of operations, there is an increase from the previous fiscal year of 21.7 billion yen (0.7%). By organization MSDF 23.1% (11,433) Part III, Chapter 4, Section 3 (Efforts Towards Project Management etc.) 3 Initiatives for Increasing the Efficiency of Procurement In light of the increasingly severe fiscal conditions, the MTDP specifies securing approximately 700 billion yen based on a policy to achieve further streamlining and rationalization in the defense capability buildup. 2 The comparison with the previous year is concerning expenditure excluding the SACO-related and the U.S. Forces realignment-related (the portion allocated for mitigating the impact on local communities and expense for the introduction of a new dedicated government aircraft). The same applies hereinafter in regard to this section. 3 The sum total of general material and future obligation concerning new contracts, which shows the amount of the material (program ) that are to be contracted in the applicable fi scal year and to be paid in the same fi scal year and beyond. The amount is trillion yen in FY DEFENSE OF JAPAN 2018

4 Defense-Related Expenditures Section 4 Fig. II Amount of Reduction Achieved Through Past Streamlining Efforts Example FY2014 FY2015 FY2016 FY2018 Procurement of equipment, etc. and services using long-term contracts Review of maintenance methods (Logistics reform) Use of civilian goods and review of specifi cation For this purpose, the MOD is currently carrying out reviews to achieve efficiency, and has sought a reduction of approximately 573 billion yen from FY2014 to through the following measures: 1) utilize longterm contracts (Part III, Chapter 4, Section 3); 2) review maintenance methods; 3) use of civilian goods and review of specifications; 4) bulk purchase of equipment; 5) scrutiny of the prime cost. Furthermore, approximately 197 billion yen of cost reduction is expected in the FY2018 budget. Concrete initiatives introduced in the FY2018 budget are as follows. A reduction of approximately 5 billion yen by making an over five-years long-term contract of Performance Based Logistics (PBL) (Part III, Chap.) for maintenance equipment of the F110 engine (fighter (F-2)). A reduction of approximately 68.5 billion yen through a review of maintenance methods including extending regular maintenance intervals for the engine of F7-10 (fixed-wing patrol aircraft {P-1}). A reduction of approximately 16.6 billion yen by pursuing cost savings through the use of civilian goods and review of specifications of equipment such as the maintenance of the tactical network control system (TNCS). A reduction of approximately 37.1 yen through bulk procurement of equipment in a single fiscal year that could lead to a reduction in billion 14.8 billion 11.0 billion 5.0 billion 8.1 billion 33.6 billion 43.2 billion 54.0 billion 68.5 billion 25.0 billion 42.3 billion 45.5 billion 58.2 billion 16.6 billion Bulk purchase of equipment 33.1 billion 35.0 billion 46.5 billion 46.7 billion 37.1 billion Prime cost scrutiny, etc billion 70.1 billion Single-year total 66.0 billion billion billion billion (Note 1) (Note 2) billion Total 66.0 billion billion billion billion billion Notes: 1. The 61.6 billion yen reduction from introducing the Patriot system capable of carrying and operating PAC-3MSE missiles, which was appropriated in the third supplementary budget for FY2016, is included in the reduction amount for. 2. The reduction from projects that were moved up to be appropriated in the fi rst supplementary budget for is included in the reduction amount for FY Figures may not add up to the total due to rounding. Fig. II (100 million USD) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 A reduction of approximately 70.1 billion yen through initiatives such as scrutinizing the unit cost and related of major equipment, etc. The Defense Budgets of Major Countries () (%) Japan U. S. China Russia ROK Australia UK France Germany , , , Fig. II (Amount of Reduction Achieved Through Past Streamlining Efforts) Defense budgets (100 million USD) Defense budgets as % of GDP Notes: 1. Defense budgets are based on each country s public documents. Dollar conversions have been made while referring to each country s purchasing power parity for as published by the OECD (official rate listed on the OECD website) (as of July 2018). (1 dollar= yen= yuan= rubles = won= Australian dollars= pound = euros (France)= euros (Germany)) 2. Defense budgets as a proportion of GDP for the U.S., U.K., France, and Germany are based on a NATO publication. The GDP figure published by the IMF was employed to calculate defense budgets as a proportion of GDP for China, Russia, the Republic of Korea and Australia Comparison with Other Countries Monolithic understanding of the defense expenditures of each country is not possible in view of differences in the socioeconomic and budgetary systems. There is not an internationally unified definition of defense expenditures, and breakdowns of defense expenditures are unclear in some countries where such data is publicly disclosed. Furthermore, in comparing the defense expenditures of each country, though there exists the method of converting their defense expenditures into dollar amounts at respective currency rates, their dollar-based defense Defense of Japan 232

5 Fig. II Changes in Defense Budgets in Surrounding Countries Over the Past Ten Years (Times) Japan U.S. Russia China ROK Australia Russia 2.84 times China 2.70 times ROK 1.62 times Australia 1.60 times Japan 1.04 times U.S times Notes: 1. Created based on the defense budgets published by each country. 2. These are numerical values obtained by simple calculation of the ratio between the defense budgets each year, with the FY2008 value as 1 (times) (rounded to two decimal places). 3. The definition and breakdown of the defense budgets of each country are not necessarily clear. As we must take into account various factors such as price levels of each country, it is very difficult to draw a comparison of defense budgets among countries. calculated in this way do not necessarily reflect the precise value based on each country s price levels. Therefore, the results of converting Japan s defenserelated expenditures and those of other countries officially published by each government into dollar amounts, using the purchasing power parity 4 of each country reported by the Organisation for Economic Co-operation and Development (OECD), are shown in Fig. II (The Defense Budgets of Major Countries). Part I, (Defense Policies of Countries) Reference 15 (Trend of Defense Expenditures of Major Countries) In addition, Fig. II (Changes in Defense Budgets in Surrounding Countries Over the Past Ten Years) shows the changes in defense expenditures of Japan s neighboring countries over the past ten years. 4 A gauge that measures each country s ability to purchase goods and services by taking into account their respective price levels. 233 DEFENSE OF JAPAN 2018