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Population Aging, Policy Reforms, and Lifetime Net Tax Rate in Japan: A Generational Accounting Approach

Author

Listed:
  • Manabu Shimasawa

    (Senior Researcher National Institute for Research Advancement)

  • Kazumasa Oguro

    (Associate Professor Faculty of Economics, Hosei University)

  • Minoru Masujima

    (Director for Macroeconomic Analysis Cabinet Office, Government of Japan)

Abstract

We employed the Generational Accounting model in estimating the generation-specific lifetime (both past and the future) benefits/burdens and income and evaluating their values as of 2010, thus estimating the lifetime net burden ratio (= lifetime net burden/lifetime income). As a result, the following points were elucidated: 1) Among the current living generations, the lifetime net burden ratio of the 0-year-old generation is about 25 percentage points higher than that of the current 90-year-old generation; 2) The lifetime net burden ratio of the future generations is about 31 percentage points higher than that of the 0-year-old generation; 3) The net burden of the current generations would have to be increased in order to narrow the generational gap between the current generations and the future generations, which would inevitably lead to an expansion of the intragenerational gap of the current generations; and 4) In order to prevent conflict of interest between the current generations, in particular the younger generations and future generations, and at the same time, narrow the intergenerational gap, it is desirable to increase the income of the current generations, in particular that of the younger generations, by achieving a high economic growth rate and implementing macroeconomic policy management that would inhibit increase in the risk premium included in the interest rate.

Suggested Citation

  • Manabu Shimasawa & Kazumasa Oguro & Minoru Masujima, 2014. "Population Aging, Policy Reforms, and Lifetime Net Tax Rate in Japan: A Generational Accounting Approach," Discussion papers ron258, Policy Research Institute, Ministry of Finance Japan.
    • Handle: RePEc:mof:wpaper:ron258
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    Cited by:

    1. SHIMASAWA Manabu & OGURO Kazumasa, 2016. "Will Abenomics Save Future Generations?," Discussion papers 16100, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    Generational Accounting; falling birthrates and aging population; fiscal sustainability; government debt;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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