Estimating Social Infrastructure Demand: The Case of Japan

The authors estimate the demand for social infrastructure investment (schools, health facilities, public housing, and government buildings) in Japan. These estimates include new construction, operation and maintenance (O&M), rehabilitation, and replacement, for the period from 2016 to 2030. Two approaches were applied to estimate the necessary infrastructure stock for each year: the multiplication of the projected number of beneficiaries by an infrastructure development standard (the micro approach) and a regression analysis with time-series data on socioeconomic variables (the macro approach). The demand for rehabilitation and replacement is examined carefully by using two alternative methods of estimation, an approach that is unique to this paper, having never been seen in other literature in this research field. The results indicate that the country needs to invest 10.3-13.5 trillion Japanese Yen or 94.6-124.0 billion USD†† in 2016 prices annually in the coming fifteen years to sustain the present level of social infrastructure services, an amount which is far larger than the current level of infrastructure investment. It also shows that the amount of spending related to O&M, rehabilitation and replacement is quite substantial, even though the required stock of social infrastructure will be smaller due to population decrease in the future. These findings and methodologies provide useful implications for a social infrastructure demand estimate for other Asian countries.