Pension Reform in Japan

This paper aims to establish guidelines for public pension reform in Japan, using a numerical simulation approach. The paper introduces the example of a minimum guaranteed pension in the Swedish pension system and compares this with the basic pension in Japan’s public pension system, with regard to methods of income redistribution through a public pension scheme. Simulation results show that the switch from the basic pension to the guaranteed pension does not always generate favorable results. If we consider a public pension program with the same scale as the current Japanese program, the highest level of social welfare is attained when a public pension system consists of only a basic pension and is financed by a consumption tax.Public pension reform; Swedish pension system; Minimum guaranteed pension; Basic pension; Life-cycle general equilibrium simulation model

Introduction of Progressive Expenditure Taxation to Japan

With a population that is aging faster than any other in the world, Japan faces serious public finance problems, particularly when it comes to tax and social security issues. The structural reforms are urgently needed to accommodate the impending demographic change. We look at the Japanese tax and social security systems through a life−cycle general equilibrium simulation model. We aim to establish guidelines for fiscal reform in Japan’s graying society and use such advanced modeling techniques to permit the calculation of the effects of alternative tax policies on capital accumulation and economic welfare. We also examine the impact of progressive expenditure taxation, coming to the novel conclusion that this form of taxation may hold the key to overcoming the large welfare loss Japan faces as its society ages under the current tax system. Furthermore, we present the concrete measures of implementing progressive expenditure taxation

The optimum quantity of debt for an aging Japan: welfare and demographic dynamics

Japan’s government is heavily indebted, and the current net debt tends to increase. This paper uses an extended life-cycle general equilibrium model with endogenous fertility to investigate an optimal size of government debt from two viewpoints: individual welfare and future demographic dynamics. A simulation analysis finds that the level of net government debt, which maximizes per-capita utility, is negative at − 220% of Japan’s gross domestic product (GDP). The results also indicate that the net debt-to-GDP ratio of − 220% produces a considerable per-capita welfare gain; however, compared to the baseline simulation with a debt-to-GDP ratio of 150%, it substantially decreases the total population in the long run