RIETI Symposium

Fiscal Reform of Japan: Redesigning the Frame of the State


Session 5: Managerial Perspective of Fiscal Reform
"Fiscal Reform from the Perspective of Social System Design"
YOKOYAMA Yoshinori (RIETI Senior Fellow)
IWAMOTO Yasushi (Professor, Department of Economics, Hitotsubashi University)

In the fifth session, Consulting Fellow Hideaki Tanaka presented his report titled "Fiscal Rules/Targets and Budget Management Reform: The experiences of other countires and the issues Japan must tackle." Through comparison with other countries, it was shown that budget management reform, such as the introduction of fiscal rules and targets, was important in correcting fiscal deficits. As specific measures to realize this, he called for the centralization of the political decision-making system and the introduction of a medium-term fiscal framework.

Senior Fellow Yoshinori Yokoyama then presented his report, "Fiscal Reform from the Perspective of Social System Design." In order to realize fiscal reform, he suggested approaching it by means of a "social system" theory. Ascase studies, his report dealt with improvement in capturing taxable income, the elimination of restrictions on corporate participation in such fields as health and medicine, asset management and tourism and designing an increase in consumption tax in a way that would benefit corporations, consumers and the government altogether. He also suggested that bureaucrats in their 40s be placed in the Cabinet Office to handle this social system design.

In response to these reports, Professor Iwamoto sorted out the various factors understood to explain fiscal performance, and positioned the Yokoyama paper as focusing on the management side, while the Tanaka paper focused on systems. Having said this, he noted that the issue of centralization of authority had been mentioned several times during the symposium and asked specifically where such power should be centralized. He also said that the institutional factors and the human factors were complementary, and that while the former were often stressed in economic research, he understood that the Yokoyama report attempted to show that the human resources side was important. However, he said that he would have liked to have seen the basis, including reference literature, for the Yokoyama report. As for the suggestions in the Tanaka report, he commented that because they were the technical aspects of the general outline, there would be little resistance and as such were realizable.

Senior Fellow Yokoyama responded by saying that he was not a scholar and acknowledged that he had not studied past research on the matter. However, he added that he felt that at this point in time it was more important to act rather than conduct a thorough examination of his suggestions. Consulting Fellow Tanaka said that due to the presence of a coalition government, an approach that concentrated authority in the Ministry of Finance, as employed in the United Kingdom and other countries, was not realistic in Japan. Instead, he called for an approach that concentrated authority either in the Cabinet or the Cabinet Secretariat that assists it. He also suggested that the Council on Fiscal and Economic Policy shoulder the role of objectively evaluating government policies.

(Text compiled and edited by KIMURA Yuji, RIETI Research Staff)