This presentation was made by Ryuichi Kataoka, Japan, at the 36th Annual Meeting of OECD Senior Budget Officials held in Rome on 11-12 June 2015.

1. Infrastructure investments in Japan
Ryuichi Kataoka
Counselor of the Minister’s Secretariat (Budget Bureau)
Ministry of Finance, JAPAN
11th June 2015
36th Annual Meeting of OECD Senior Budget Officials

2. Social security
31.5
Others
(including public works)
25.8
Local allocation
tax grants etc.
15.5
National debt service
23.5
Social security
11.6
Others
(including public works)
25.1
Local allocation
tax grants
15.3
National debt
service
14.3
Tax revenues
54.5
※
Government
bond issues
36.9
（＋9.2）
Tax revenues
58.0
※
Government
bond issues
5.6
（＋19.9）
(unit: trillion yen)
【FY1990】
【FY2015】
Revenues
66.2
Expenditures
66.2
Revenues
96.3
Expenditures
96.3
※Other revenues （FY1990：2.6trillion yen, FY2015：5.0 trillion yen）
(Note) Initial budget based.
① Severe Fiscal Situation in Japan
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3. ② Weighing on Maintenance and Renewal
● Increasing needs for maintenance and renewal of social infrastructures
● Need to encourage the private investments under the current deteriorated fiscal
situation in Japan
FY Projection result
FY2013 Approx. 3.6 trillion※
FY2023 Approx. 4.3 ～ 5.1 trillion
FY2033 Approx. 4.6 ～ 5.5 trillion
※FY2013 data is estimated data(not the actual data)
※Coverage: 10 areas (road, water conservation, sewage, port,
public housing, park, coast, airport, aid to navigation,
governmental facility)
※Maintenance body: Central and local governments, etc.
Projection of the cost for maintenance and renewal of
social infrastructures in the future
(Ministry of Land, Infrastructure, Transport and Tourism)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
～1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
The number of bridges divided by construction year
municipalities
prefectures
government-
designated city
central government
expressway company
(FY)
2

4. 36.0
(36.6%)
32.5
(26.3%)
26.0
(20.5%)
22.0
(17.4%)
18.5
(15.3%)
13.0
(13.4%)
56.1
(57.1%)
76.2
(61.7%) 78.9
(62.1%) 71.8
(56.6%) 65.6
(54.4%)
46.4
(47.8%)
6.2
(6.3%)
14.9
(12.0%)
22.0
(17.4%) 33.1
(26.1%) 36.6
(30.3%)
37.7
(38.8%)
1965 1990 2000 2014 2025 2050
Age 65 and
over
Age 20-64
Age 19 and
under
Total
population
98.3
Total
population
123.6
Total
population
127.0
Total
population
120.7
Total
population
97.1
Total
population
126.9
③ Rapid decline of total population in the future
(Source) Demographic composition from 1965 to 1990 according to the “National population census” conducted by the Ministry of Internal Affairs and Communications, and
data for 2014 onwards according to “Japan’s demographic composition in the future (estimation as of January 2012)” issued by the National Institute of Population and
Social Security Research.
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(Unit: million people)

5. Public works-related expenditures in FY2015 initial budget: 6.0 trillion
(up 2.6 billion or +0.0%, on a year-on-year basis)
7.3 7.3 7.7 8.1 8.5 8.9 9.2 9.6 9.7
9.0 9.4 9.4 9.4
8.4 8.1 7.8 7.5 7.2 6.9 6.7 7.1
5.8
5.0 4.6
5.3
6.0 6.0
8.5
8.1
8.5
9.9
12.5
10.5
14.2
11.2
10.5
14.9
12.2
11.5 11.3
10.0
8.3
8.9
8.0 7.8
7.4 7.3
8.8
6.4
7.8
7.0
6.3 6.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
(trillion yen)
(FY)
(FY)
Initial budget
Supplementary budget
Trend in Public Works-related Expenditures
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6. Basic Concept of Social Infrastructure Investment
①Severe fiscal
situation
②Improved level of
social infrastructure
③Rapid decline of total
population in the future
Need to effectively allocate public funds to highly prioritized public works.
Need to conduct the investment in more deliberate and efficient manner.
● New Investment: Need to evaluate the cost effectiveness of projects and select
them carefully, while focusing on the projects for enhancing the international
competitiveness and for preventing and/or reducing the damage from natural
disasters.
● Encouraging the private investments and private funds through PPP/PFI
● Implementing the PDCA cycle
Public Finance Act
Article 4 (Limitations on issue of public bonds and borrowings)
(1) The expenditure of the State shall have financial sources in the revenue excluding public bonds
or borrowings. However, for the financial source of public works expenses, equity investments
and loans, it shall be permitted to issue public bonds or make borrowings within the limits of the
amounts of money approved by the Diet resolution.
● Overview
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7. (Reference)

8. (1) Concession PFI : 2-3 trillion yen
< Concrete action plan >
• Introducing a concession PFI in the fields of airport, water supply and sewage etc.
(2) PFI projects collecting construction costs through utilizing the revenue from
commercial facilities built on / in / public facilities: 3-4 trillion yen
< Concrete action plan >
• Introducing PPP method for rehabilitation of public facilities such as expressway (especially Metropolitan
Expressway which requires a large-scale rehabilitation).
(3) PPP projects utilizing the private sector’s proposals such as effective use of public
real estate : 2 trillion yen
< Concrete action plan >
• Issuance of a guideline on the private sector’s proposals and establishment of a contact to receive them.
• Establishment of public-private cooperation system in order to support formulation of PFI projects in cross-cutting
approach which Infrastructure UK has already adopted.
(4) Others (Introducing performance-linked revenue system, bundling the same type of
several public facilities etc.): 3 trillion yen
<Concrete efforts for (1) ～(4)>
• Prioritizing subsidies and grants based on the appropriate evaluation toward government ministries and agencies and
local governments from the point of how much effort on Action Plan is made.
Action Plan toward Fundamental Reform of PPP/PFI
(decided by the Council for the Promotion of PFI on June 6th, 2013)
Projects in the following 4 categories are to be focused on toward achievement of total 12
trillion yen of PPP/PFI projects in 10 years (2013-2022) as attractive to the private and local
areas. The size and concrete action for each category are indicated below.
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9. To accelerate “Action Plan toward fundamental reform of PPP/PFI” and achieve
the creation of local business opportunities and the efficient administration of
infrastructure and the improvement in infrastructure service and the economic
growth led by leveraging of private investment, set the period of intensive
enhancement and the priority area and the numerical targets and accelerate the
scale objective of the “Action Plan” (2-3 trillion yen for next 3 years) by the
government as a whole.
Period of Intensive Effort of “Action Plan”
(decided by the Council for the Promotion of PFI on June 16th, 2014)
(1)Scale objective： 2-3 trillion yen
(2)Number objective： 6 airport, 6 water supply and sewage,
1 road
○ the priority area and the numerical targets
the period of intensive
enhancement
Next 3 years（2014/4-2016/3）
the priority area airport, water supply and sewage, road
the numerical targets
(1) This target is not set on the precise accumulation of PFI project pipeline.
(2) This target include consideration of introduction of concession
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10. １
(Adoption of a new project) (Undertaken) (Completed)
(Within 5 years of
completion)
Evaluation at adoption of
a new project
Revaluation Ex-post evaluation
(Not undertaken
for 3 years)
(Continued for 5 years)
(Every 3 years after
revaluation)
Planning-stage evaluation
In serviceProject implementation
Planning stage
1. Planning-stage evaluation
Clarify policy targets, and compare and evaluate several project proposals
2. Evaluation at adoption of a new project
Evaluate the necessity of a new project to decide whether to launch the project
3. Revaluation
Review the necessity of a project to decide whether to continue or discontinue the project
4. Ex-post evaluation
Check the effects and environmental impacts of a project after its completion and, if necessary,
discuss more proper measures and planning to apply to future projects
Implementing the PDCA Cycle(Central Government)
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11. Outline of the Calculation of Benefit by Cost (B/C) in the Road Development Project
Calculation of Benefits Calculation of Costs
○ Development cost
○ Total maintenance cost for 50 years
usage
Total costs
Evaluating the monetary value
by measuring the value of time
for people and traffic
Calculation of B/C
○ Social discount rate (4%)
○ To remove the price fluctuation (deflator)
○ Benefits from driving time reduction = The value of time per vehicle × Reduced driving time × Traffic volume
○ Benefits from driving costs reduction = Reduced driving costs by road development × Driving distance × Traffic volume
○ Benefits from traffic accidents reduction = Reduced the number of traffic accidents causing injury or death by road
development × The average amount of loss per traffic accident (taking into
account human loss, property damage and the loss by traffic jam)
○ Benefits from driving time reduction
○ Benefits from driving costs reduction
○ Benefits from traffic accidents reduction
Total benefits
Calculation
method
Estimating the flow of traffic
○ Traffic volume
○ The speed of traffic flow etc.
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