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Population Aging, Health Care, and Fiscal Policy Reform: The challenges for Japan

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  • HSU Minchung
  • YAMADA Tomoaki

Abstract

This paper quantitatively studies the influence of a rapidly aging population on the financing of a public universal health insurance system and the corresponding fiscal policies. We construct a general equilibrium life-cycle model to investigate the effects of aging and evaluate various policy alternatives designed to lessen the negative influence of aging. In particular, we analyze the reforms of insurance benefits and tax financing tools that were the recent focus of a great amount of attention and debate in Japan because of the tense financial situation. We show that although the potential reforms significantly improve the welfare of future generations, political implementation of such reforms is difficult because of the large welfare costs for the current population. Our analysis suggests that a gradual reform with an intergenerational redistribution will be more implementable politically than a sudden reform.

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  • HSU Minchung & YAMADA Tomoaki, 2017. "Population Aging, Health Care, and Fiscal Policy Reform: The challenges for Japan," Discussion papers 17038, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:17038
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    Cited by:

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    2. Minchung Hsu & Tomoaki Yamada, 2019. "Population Aging, Health Care, and Fiscal Policy Reform: The Challenges for Japan," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 547-577, April.
    3. Sagiri Kitao, 2017. "When do we Start? Pension reform in ageing Japan," The Japanese Economic Review, Japanese Economic Association, vol. 68(1), pages 26-47, March.
    4. Selahattin İmrohoroğlu & Sagiri Kitao & Tomoaki Yamada, 2017. "Can Guest Workers Solve Japan'S Fiscal Problems?," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1287-1307, July.
    5. Yuan-Ho Hsu & Hiroshi Yoshida & Fengming Chen, 2022. "The Impacts of Population Aging on China’s Economy," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(1), pages 105-130, January.
    6. FUKAI Taiyo & ICHIMURA Hidehiko & KITAO Sagiri & MIKOSHIBA Minamo, 2021. "Medical Expenditures over the Life Cycle: Persistent Risks and Insurance," Discussion papers 21073, Research Institute of Economy, Trade and Industry (RIETI).
    7. Reona Hagiwara, 2022. "Welfare Effects of Health Insurance Reform: The Role of Elastic Medical Demand," IMES Discussion Paper Series 22-E-05, Institute for Monetary and Economic Studies, Bank of Japan.
    8. Ono, Taiki, 2024. "Bequests and wealth inequality in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 72(C).

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