RIETI Symposium

Fiscal Reform of Japan: Redesigning the Frame of the State

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.

Original discussion papers in Japanese [PDF:708KB] >>