Yasushi Iwamoto

DO BORDERS MATTER? EVIDENCE FROM JAPANESE REGIONAL NET CAPITAL FLOWS*

Are international borders barriers to capital flows? We use evidence on net capital flows among regions within a country as a benchmark. For this purpose we develop a data set of saving and investment rates of Japanese prefectures. We find that the correlation between saving and investment rates is higher for OECD countries than for Japanese regions in both time-series and cross-sectional data. After controlling for factors that are expected to contribute to a positive correlation in the absence of barriers to capital flows, we conclude that primarily long-term capital flows are hindered by national borders, as reflected in the cross-sectional evidence.

Testing for a unit root in Japanese GNP

Abstract This paper tests for a unit root in Japanese GNP between 1955 and 1987, paying particular attention to the kink in the GNP time series. A careful examination of the kinked point shows that Japanese GNP has a unit root in samples both before and after the kinked point, in contrast to Takeuchis (1987) research, which specified the kinked point a priori. In addition, fluctuations in GNP are caused mainly by permanent shocks; transitory shocks play a minor role.

A reappraisal of the incidence of employer contributions to social security in Japan

This paper reappraises Tachibanaki and Yokoyama (2008) -an empirical analysis that indicates no apparent backward shifting of employer social insurance contributions- by modifying their empirical strategy. First, we attempt to control for a spurious positive correlation between wages and employers contribution rates by trend variables. Second, we exclude two industries from our sample that have small numbers of workers and establishments to remove sampling errors in wages. Our results imply that the social insurance burden shifts back on to employees to a certain extent, contrary to Tachibanaki and Yokoyama (2008). Our finding is consistent with other existing studies. (This abstract was borrowed from another version of this item.)

Foreign Tax Credit and the Current Account

This paper provides a general equilibrium analysis of the effects of a foreign tax credit (FTC) provision on current account dynamics of a small, open economy. Because of the asymmetric functioning of FTC, the rate of return on domestic capital is determined by the arbitrage of the marginal investor, the investor in the creditor country. Thus a change in the home country capital income tax rate causes different responses in long-run foreign asset holdings and the current account dynamics depending upon whether the country is a net creditor or debtor and upon whether the country has a higher tax rate than the foreign country or not.

Japan's saving rate is indeed lower than Professor Hayashi revealed

Abstract Hayashi (1986) found that if Japanese national accounts are adjusted to the US National Income and Product Accounts definition, the apparent gap in the saving rates was substantially reduced. This note shows that his adjustment method can be improved in two ways. First, his treatment of land investment was inconsistent. Second, his deduction of the service flow of government capital from national income is unnecessary. After taking into account these problems, this note found that the ratio of Japans national net saving to Net National Product is up to 0.6 percentage point lower than Hayashi found.

Effective tax rates and Tobin's q

Abstract This paper clarifies the relation between the average and marginal effective tax rates using the notion of the change in Tobins average q . The equation connecting the effective rates shows that corporate taxation can be represented by a mixture of two extreme tax rules; one being a distorting pure corporate tax and the other a nondistorting cash flow tax. The paper proposes new measures representing this feature.

Designing New Systems Through Risk Adjustment

Public health insurance for Japan’s working generations is divided into several systems. There are disparities among these systems in terms of their state of financing due to differences in the income level of premium payers. The state of financing of National Health Insurance is particularly problematic. Risk adjustment can adjust disparities in premiums without hindering the management efforts of insurers. This would make it possible to adjust disparities in premiums arising from factors such as the age structure and income level of subscribers, which cannot be controlled by insurers, while disparities due to other factors would still occur. The introduction of risk adjustment to the National Health Insurance system could be expected to resolve the system’s financial problems.

A REAPPRAISAL OF THE INCIDENCE OF EMPLOYER CONTRIBUTIONS TO SOCIAL SECURITY IN JAPAN

This paper reappraises Tachibanaki and Yokoyama (2008) -an empirical analysis that indicates no apparent backward shifting of employer social insurance contributions- by modifying their empirical strategy. First, we attempt to control for a spurious positive correlation between wages and employers contribution rates by trend variables. Second, we exclude two industries from our sample that have small numbers of workers and establishments to remove sampling errors in wages. Our results imply that the social insurance burden shifts back on to employees to a certain extent, contrary to Tachibanaki and Yokoyama (2008). Our finding is consistent with other existing studies. (This abstract was borrowed from another version of this item.)

Comments on “Managing Public Costs in the Japanese Health and Nursing Care Sector,” “Challenges in Creating a Cohesive System for Health Care, Pensions, and the Needs of the Elderly,” and “Avoiding a Fiscal/Demographic/Economic Debacle in Japan”

Chapters 9, 10, and 11 have presented a clear perspective on the broad set of issues and problems associated with the long-term financing of Japan’s social insurance system. All of them suggest that in recent years, Japan has undertaken some important policy reforms in the sphere of social insurance. Pension reform in particular has seen a number of structural changes that have enhanced the underlying financial sustainability of the pension system. In particular, some automatic adjustments in pension benefits are now built into the system; the minimum retirement age has been increased; the pension accrual rate has been reduced; the age of minimum eligibility for retirement benefits has been increased; there has been a shift from wage to price indexing; some tax exemptions for the elderly have been removed; and a defined contribution system—albeit modest—has been introduced. The establishment of a long-term care insurance system has also been innovative relative to other industrial countries. In the sphere of health care, Japan starts from a reasonable position in terms of the share of its total output devoted to health care spending (although Professor Kotlikoff notes that the pace of growth in such outlays has been worrisome in recent years).