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Local Government Bond Market and the Revenue Bond

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. Central Government G= 81.8 (trillion yen) T = 43.8 Bond issue = 36.4 Bond/G = 44.6% Bond Stock=518 trillion

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Local Government Bond Market and the Revenue Bond

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

  2. Size of the Central and Local Government/GDP

  3. 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) Comparison between Central and Local Government in Japan (2003)

  4. Central and Local Government Debt/GDP Total Debt Central Gov. Local Gov. GDP 1970 7.2 4.2 2.9 75.2 (9.6%) (5.7%) (4.0%) • 32.1 18.6 14.0 152.3 (21.1%) (12.3%) (9.2%) 1980 118.1 83.1 39.0 246.2 (48.0%) (33.8%) (15.9%) • 265.8 200.3 67.0 449.9 (59.1%) (44.5%) (14.9%) • 718.6 547.6 203.7 500.6 (143.6%) (109.4%) (40.7%)

  5. Public Debt / GDP Ratio

  6. 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 　　　　　　　　　86,211 100.00 • 給与関係経費 　　　　　　　　　23,438 27.19 • 　給与費　 　　　　　　　　　23,370 27.11 • 一般行政経費 　　　　　　　　　21,026 24.39 • 　国庫補助負担金等を伴うもの　9,841 11.42 • 　　生活保護費　 　　　　　　　　　　2,024 2.35 • 　　児童保護費　 　　　　　　　　　　1,666 1.93 • 　国庫補助負担金を伴わないもの 11,185 12.97 • 公債費 　　　　　　　　　13,767 15.97 • 維持補修費 　　　　　　　　　　1,007 1.17 • 投資的経費 　　　　　　　　　23,287 27.01 • 　直轄事業負担金　　　　　　　　　1,181 1.37 • 　公共事業費　　　　　　　　　　　　7,2148.37 • 　　普通建設事業費　 　　　7,1558.30 • 　　災害復旧事業費　　　　　　　　　　　59 0.07 • 　一般事業費　　　　　　　　　　　　　9,61711.16 • 　　普通建設事業費　 　　　　9,51411.04 • 　　災害復旧事業費　　　　　　　　　　　103 0.12 • 　特別事業費　 　　　　　　　　　　　5,2636.10

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

  8. Characteristic of Local Bond Market (1)政府資金(5-30years) ５.6 trillion yen　　３２.0% (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） １８.１% 　　　　　　　 －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

  9. 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15.12　（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15.12(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

  10. Bond Market in Japan(2002） Government Bond (Stock) 422 trillion yen Local Government Bond 58 Corporate Bond 54 Government Agency Bond 65 GDP 500 ----------------------------------------------------- Private Bank Loans 666 Government Bank Loans 537

  11. Characteristics of JGB Market in Japan 1Mainly held by financial institutions,403.52 Households, very small portion, 12.33, Overseas holdings, 16.7----------------------------------------Maturity changes,1,used to be 10 year government bonds,2,Short-term, Medium term, Long term3, New Government Bond for individuals(Starting from March 2003, sold through banks and post offices)

  12. JGB Interest Rate (10 Year Bond)

  13. 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

  14. 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 National Minimum Level of Public Goods

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

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

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

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