Annual Report on

The Japanese Economy and Public Finance

2005

- No Gains Without Reforms V -

Cabinet Office

Government of Japan


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Contents

Annual Report on The Japanese Economy and Public Finance 2005

Introduction

Chapter 1 Japanese Economy Aims for Long-term Growth

    Section 1 Current Temporary Slowdown will come to an end
    1. Major Slowdown in Economic Growth Rate in Latter Half of 2004
    2. Further Steady Growth in the Household Sector
    3. Advancement of Reforms in the Business Sector and Increases in Capital Investment
    4. Improving Employment Conditions and the Adjustment of Labor Share
    5. IT Demand and Economic Trends

    Section 2 Points to Keep in Mind Regarding Economic Trends
    1. The Sharp Rise in Crude Oil Prices
    2. The Causes of the Slowdown in Exports
    3. Evaluation of the Present State of the Economy

    Section 3 From an Intensive Adjustment Period to a Concentrated Consolidation Period
    1. Outline of Intensive Adjustment Period
    2. Normalization of the Non-performing Loans Issue
    3. Trends of Land Prices
    4. Efforts to Overcome Deflation
    5. Challenges in the Concentrated Consolidation Period

    Section 4 Evaluation of Fiscal and Monetary Policies
    1. Fiscal Policy Toward the Reform of Both Expenditure and Revenue in an Integrated Manner
    2. Evaluation of Quantitative Easing Policy

    Section 5 Future Outlook for the Economy

Chapter 2 From Public Sector to Private Sector - Reconstruction of the Government Sector and Associated Challenges

    Section 1 Views on Small Government
    1. The Size of Government
    2. Impact of Government Size on Economic Activities
    3. Public Awareness on the Size of Government

    Section 2 From Public Sector to Private Sector - Various Methods
    1. The New Boundary between the Private and the Public Sector
    2. "From Public Sector to Private Sector" - Commissioning of Administrative and Business Activities and PFI
    3. "From Public Sector to Private Sector" - Privatization (Transfer of Ownership Type)
    4. "From Public Sector to Private Sector" - Changes in the Flow of Funds and Policy-based Finance
    5. Special Public Institutions, Incorporated Administrative Agencies, Local Public Corporations

    Section 3 Reform of Local Public Finances
    1. Review of the Relationship between Central and Local Government
    2. Administrative Efficiency through Expansion of Size
    3. Fiscal Disparities between Local Governments and Causes

    Section 4 Challenges in Aiming for Small Government
    1. Strengthening Initiatives toward Opening Up the Publicly Regulated Market
    2. Challenges Associated with Realizing an Effective Shift from Public Sector to Private Sector
    3. Conclusion

Chapter 3 The "Demographic Wave" and its Impacts on the Economic Structure

    Section 1 Demographic Change and its Economic Significance

    Section 2 The Demographic Wave and its Impact on Household Behavior
    1. The Demographic Wave and Structural Changes in Consumption
    2. Aging and Challenges for Medical Care and Long-term Care
    3. The Decline in the Household Savings Rate due to Aging and its Implications for the Financial Asset Market
    4. Housing Selection Behavior and the Future Housing Policies

    Section 3 The Demographic Wave and Business Competitiveness
    1. Impact on Employment and Wages
    2. Impact of Aging on Retirement Benefit Plans

    Section 4 The Source of Innovation and the Challenge to Improve Competitiveness

   Conclusion

   Appended Figures and Tables

   Appended Notes

   Reference Materials

   Long-term Economic Statistics


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