Project Paper - Session 2
"Why Does the Government's Budget Balloon and How Can it be Curbed?: Focusing on Incentives for Bureaucrats" (Abstract of Discussion Paper 04-J-008)
KADONO Nario (RIETI Consulting Fellow / Deputy Director, Macro Economic Affairs Division, Economic and Industrial Policy Bureau, METI)
TAKIZAWA Hirokazu (RIETI Fellow & Deputy Director of Research)
This paper discusses the influence that Japan’s bureaucracy and its personnel system has on the ongoing fiscal problem. The issue of bureaucrats’ incentives which shape the decision-making process must be addressed when discussing fiscal reform. The common pool problem encountered in fiscal governance is generally observed in other countries where an add-up or bottom-up style of decision-making system is adopted for budget formulation. This paper, however, argues that the presence of Japan’s unique bureaucratic personnel system – established during the high growth era and characterized by "compartmentalization" and "immobilit" – has aggravated the common pool problem substantially. Based on this understanding, the paper says that a mechanism for restoring discipline needs to be internalized by utilizing the self-innovating ability of such an immobilized personnel system. For achieving this, the paper points to the need to reform the budget evaluation system, clarify responsibility for budget-related tasks, and increase the mobility of human resources.
