Local Government Bond Market and the Revenue Bond Keio University Department of Economics Naoyuki Yoshino 吉野直行

Size of the Central and Local Government/GDP

Comparison between Central and Local Government in Japan (2003) Central Government G= 81.8 (trillion yen) T = 43.8 Bond issue = 36.4 Bond/G = 44.6% Bond Stock=518 trillion 2004=109.4% (Bs/GDP) Local Government G= 86.2 (trillion yen) T = 32.6 Bond Issue = 15.1 Bond/G = 17.5% Bond Stock=199 trillion 2004=40.7% (Bs/GDP)

Central and Local Government Debt/GDP Total Debt Central Gov. Local Gov. GDP (9.6%) (5.7%) (4.0%) (21.1%) (12.3%) (9.2%) (48.0%) (33.8%) (15.9%) (59.1%) (44.5%) (14.9%) (143.6%) (109.4%) (40.7%)

Public Debt / GDP Ratio

Local Government Expenditures 15 年度 構成比 地方財政計画の歳出 F.Y.2003 FY2003 歳出総額 86, 給与関係経費 23, 給与費 23, 一般行政経費 21, 国庫補助負担金等を伴うもの 9, 生活保護費 2, 児童保護費 1, 国庫補助負担金を伴わないもの 11, 公債費 13, 維持補修費 1, 投資的経費 23, 直轄事業負担金 1, 公共事業費 7, 普通建設事業費 7, 災害復旧事業費 一般事業費 9, 普通建設事業費 9, 災害復旧事業費 特別事業費 5,

15 年度構成比率 地方財政計画の歳入 F.Y.2003FY2003 歳入総額 86, 地方税 32, 地方交付税 18, 国庫支出金 12, 義務教育職員給与費負担金 2, その他普通補助負担金等 4, 生活保護費 1, 公共事業費補助負担金 3, 地方債 15, # 一般会計債 8, # 一般公共事業 2, 一般単独事業 4, 雑収入 5,

Local Government Borrowing / GDP Ratio (Local Bond is increasing drastically)

Characteristic of Local Bond Market (1) 政府資金 ( 5-30years ) ５.6 trillion yen ３ ２.0% (1-1) 財政投融資資金 (21.2%), (1-2) 郵政公社資金 (10.9%) (2) 公営公庫資金 ( 5-28years ) １. ６ trillion yen ９. ２％ (3) 民間資金 １. ０ trillion yen ５８. ７％ (3-1) （市場公募－共同発行（２７地方政府） １ ８. １ % －個別発行 ( 5years, 10, 20, 30years ) －住民公募 ( 5years ) (3-2) （銀行引受） ( mainly 10years )10.2 trillion ４０. ７ % (4) 合計 2004 年度地方債計画額 17.4 trillion yen

市場公募地方債 全国型市場地方方募債 ２． ８６兆円 (1) 市場公募型地方債発行の推移 1952, 東京都、大阪府、兵庫県、 横浜・名古屋・京都・大阪・神戸市 1973, 北海道、神奈川県、静岡県、愛知県、広島県、福岡県 札幌・川崎・北九州・福岡市 1975, 宮城県、埼玉県、千葉県、京都府 1982, 広島市 1988, 茨城県、新潟県、長野県、 仙台市 1994, 千葉市 2003, さいたま市 2004, 福島県、群馬県、岐阜県、熊本県、 (2) 住民参加型ミニ市場公募地方債 ０．３ 兆円 (1) 青森県民債 H14.12 (2) 北東北みらい債 （３）やまがた未来債 15.9 (4) うつく しま県民債 15.5 (6) とちぎ未来債 (7) 群馬県愛県債 H14 (8) とやま県民債 H15 (9) ふるさといしかわ債 H15.2 (10) ぎふ県民債 H!4.10,H15.12 (!!) びわこ県民債 (12) まぼろし奈良県債 H!5.9 (!3) 紀の国きらら債 H!5.12 (!4) とっとり県民債 H!5 、 (!5) しまね愛県債 H15 (!6) 讃岐のくにづくり債 H15.6 (!7) さが県民債 H15.3 (18) な がさき創造県民債 H15.3 (19) くまもと新幹線ゆめ県債 (20) おおいた元気債 H!4.12,H15.12

Bond Market in Japan (2002 ） Government Bond (Stock) 422 trillion yen Local Government Bond 58 Corporate Bond 54 Government Agency Bond 65 GDP Private Bank Loans 666 Government Bank Loans 537

Characteristics of JGB Market in Japan 1Mainly held by financial institutions, Households, very small portion, , Overseas holdings, Maturity changes, 1,used to be 10 year government bonds, 2,Short-term, Medium term, Long term 3, New Government Bond for individuals (Starting from March 2003, sold through banks and post offices)

JGB Interest Rate (10 Year Bond)

Reform of the Allocation of Public Investment Define the level of “National Minimum” School, Police Protection, Education, Basic Infrastructure (1) User-Based Revenue Bond (a) Beyond the level of National Minimum should be based on Revenue Bond (b) Issue Bond for specific project such as Air-port, Highways (c) The rate of return on bonds depend on the revenue of each project (d) External Benefit - Tax should be subsidized (2) PFI (Private Financial Initiatives) (a) Public Projects are partly financed by private funds (b) Failures of the Third Party Project of Japan (c) Weak Governance, No Responsibility in case of failure

National Minimum Level of Public Goods Central Government Level National Defense Police, Fire protection Macroeconomic Policy Higher education (University) Housing Policy Medicare Social Welfare Unemployment Compensation Local Government Level Child care Primary and Secondary Education Water Supply and Sanitation Regional Economic Policy Regional Disaster Protection Medicare for elderly people

Effectiveness of Public Capital Stock - “Private capital/Public capital ratio” to “Marginal productivity of Public capital” - Secondary Industry (Industrial Sector)

Effectiveness of Public Capital Stock - “Private capital/Public capital ratio” to “Marginal productivity of Public capital” - Tertiary Industry

Determinants of regional allocation of public investment (Political Power plays a role)