Reforms to cope with rapid aging and depopulation Japan is now one of the most rapidly aging economies in the world, where the age-dependency ratio has been rapidly increasing. Japan’s population hit its peak in 2004 (at 127.8 million) and started to decline in 2005 for the first time in its history. The population share of the ages 65 or over, that stood at 17.3% at the turn of the century, is expected to climb up to 22.5% in 2010, 27.8% in 2020, and 35.7% in 2050. The social security reform has been conducted, including public pension, health insurance and nursery care insurance. However, as the speed of aging has been very rapid, further reforms are needed.
Initiatives to shift authority from the public sector to the private sector Another major Koizumi reform initiative was to shift functions and resources from the public sector to the private sector. Some major privatization programs were conducted, however as seen in the Postal reform which is to be completed in 2018, they were often nominal and subject to future political environments. Initiatives to shift authority from the central government to local governments Another major category of reform was ‘decentralization’, i.e. a shift of authorities/functions and budgetary resources from the central government to local governments. The ‘trinity reform’of (1) shifting functions/authorities to the local government, (2) shifting the tax base from the central to local governments, and (3) reducing transfer taxes and categorical grants to local governments was designed in order to weaken central government leadership and strengthen local autonomy. As this set of reforms is still underway, strong leadership is necessary to attain the initial objectives.