Considerations on Infrastructure Aging and Renewal Investment Financing

In Japan today, the infrastructure that was intensively developed during the high-growth period of the 1960s and 1970s is simultaneously deteriorating. If left unchecked, this will lead to serious accidents such as bridge and tunnel collapses, road cave-ins, and water main bursts, endangering the lives and property of the people. Signs are already beginning to appear. In order to solve this problem, the aging infrastructure should be promptly renewed, but the estimated investment amount to renew the entire current infrastructure would be an enormous 12.9 trillion yen per year. Instead of financing this by issuing more bonds or raising taxes, various wisdom measures should be implemented to reduce the scale of renewal investment, such as public facility restructuring (wide-area expansion, softening, consolidation, shared use, and multifunctionalization), preventive maintenance, and risk-based management (RBM). The overall reduction rate was estimated to be 40%. Applying these measures to all of Japan, the amount of investment required for renewal would be reduced to 7.7 trillion yen per year. Two issues are considered here. The first is the consensus-building issue of how to obtain the agreement with current users to the reduction. The second is how to finance the large burden that will remain after the reduction. With regard to the first, consensus building, we introduced social experiments that are currently underway in the Toyo University Priority Research Project. In particular, the Toyo University-style Deliberative Polling (TDP), in which explanations are provided between multiple anonymous votes, is expected to be effective. Regarding the second type of financing, I pointed out that particularly necessary investments include (a) base facilities that integrate the functions of other public facilities in schools after consolidation, (b) beneficiary-pay infrastructure such as water and sewage systems, and (c) infrastructure that does not generate cash flow such as roads and bridges, and that financing for these investments should be based on public-private partnerships (PPP) rather than conventional financing. Specifically, I envisioned (a) service purchase PFI, (b) public facility management rights, and (c) availability payments (including the use of public REITs). All of these projects involve risk. The FILP is expected to provide risk money, including the provision of funds to specialized financial institutions capable of risk-taking or the establishment of specialized funds, to ensure that financing proceeds smoothly.