Project Paper - Session 7
"Stock Analysis of Fiscal Problems: Focusing on Burdens Brought to Future Generations" (Abstract of Discussion Paper 04-J-019)
Analysis of potential multiyear effects is often important when deciding upon government policy and this is the case with policy decisions concerning the public pension program and public works investments. In order to enable such long-term analysis, this paper offers methods for presenting stock data on fiscal conditions including future subsidies in a balance-sheet format and applies it to Japan�s two pressing problems: those concerning the public pension program and public highway corporations.
With regard to the public pension program, the currently proposed changes to the pension program would introduce the so-called "macro slide" system, under which the value of pension benefits would be adjusted in line with macroeconomic parameters such as the gross wage amount and working population of the time, should the burden of pension premiums exceed the designated level. As a result, the sustainability of the program would be improved to some extent, reducing the amount of pension deficits from some ¥800 trillion to about ¥600 trillion. It is meaningless to discuss the manner in which pension fund contributions are collected, that is, whether they are taken in the form of premiums or tax. Instead, the Social Insurance Agency and the taxation authority should be integrated. Also, it must be remembered that the sustainability of Japan�s public pension program � albeit improved under the proposed revisions � remains far from secure; the ratio of pension benefits to gross domestic product is as high as 1.2%, compared to 0.4% in the United States.
The four major public highway corporations are not in a state of capital deficit. The combined amount of assets for the four corporations exceeds that of liabilities by ¥3 � ¥5 trillion. Therefore, these four public corporations can be privatized with no burden placed on taxpayers. The huge scale of liabilities held by these companies is often cited as a problem but they do have assets of an equivalent size on the other side of their balance sheets. Therefore, it is not appropriate to hurriedly try to reduce the liabilities alone. The problem with Japanese highways is their expensive toll fees and thus the purpose of privatization should be to reduce these fees.