41 National Budget for Fiscal Year 2024
The annual general account budget, approved in March 2024, totaled 112.5711 trillion yen, the second highest on record, exceeding 110 trillion yen for the second consecutive year. Social security expenses amounted to 37.7193 trillion yen, representing 30% of the budget. Defense spending reached a record high of 7.9172 trillion yen, reflecting concerns about the current security environment. Additionally, a reserve fund of 1 trillion yen was allocated to address rising living costs and promote higher wage payments, while another 1 trillion yen was set aside as a general reserve fund for the restoration efforts following the Noto Peninsula earthquake. Bond-related expenses, including debt redemption and interest payments, amounted to 27.9 trillion yen.
Social security expenses were particularly high due to measures aimed at addressing Japan’s low birth rate and increasing wages for medical workers. Defense spending saw a substantial increase of 1.1282 trillion yen compared to 2023, signaling a significant effort to strengthen security measures. The allocation of local tax grants increased by 1.3871 trillion yen from the previous fiscal year, partly to compensate for reduced residence tax revenue caused by the “Flat-Amount Tax Cut.”
Bond-related expenses reached their highest level ever, driven primarily by an increase in the assumed interest rate on bond repayments, which rose from 1.1% to 1.9%, reflecting higher long-term interest rates. Combined, social security and bond expenses account for approximately 60% of total expenditures, raising concerns about potential financial rigidity in the future, including reduced investment in growth industries.
On the revenue side, tax revenue, which comprises 60% of annual revenue, is projected to reach 69.6080 trillion yen. This estimate assumes improved corporate performance following the recovery from the COVID-19 pandemic and higher consumption tax revenues due to rising living costs. However, newly issued bonds to cover the revenue shortfall amounted to 35.4490 trillion yen, roughly equivalent to the previous year’s level. The fiscal 2024 general account budget thus relies on debt (national bonds) for over 30% of its funding.

42 Social Insurance
The aim of the social insurance system is to stabilize people’s lives by providing guaranteed support in situations such as illness, old age, the need for nursing care, childbirth, unemployment, or death. National social security consists of social insurance, public assistance, social welfare, and public health.
Social insurance is the primary component of social security, through which the government and other entities provide benefits when risks covered by an insurance policy arise. It includes pensions, medical care, industrial accident coverage, employment insurance, and nursing care insurance, which was introduced in April 2000.
Social insurance expenses have been rising due to an aging society, particularly in the areas of pensions, medical care, and nursing care. However, in fiscal year 2022, expenses totaled 137.83 trillion yen, marking the first year-on-year decrease since fiscal year 1950. This was primarily due to reduced employment measures related to the COVID-19 pandemic.
Pensions accounted for approximately 40% (55.79 trillion yen) of the social insurance expenses, while medical care represented 35.4% (48.75 trillion yen). Overall, these expenses account for 24.33% of GDP, up from 22% in fiscal year 2019, prior to the COVID-19 pandemic.
By 2025, all members of the baby boomer generation will be 75 or older, leading to increased social security expenses. To curb rising medical costs, out-of-pocket expenses for elderly individuals aged 75 and older with higher incomes were increased from 10% to 20%.The government, focused on creating a sustainable society, has engaged in extensive discussions on social insurance reforms targeted for completion by 2040.

43 Pension System
In our national pension system, all individuals aged 20 to 60 are required to participate, and those aged 65 and older receive pension payments. The system consists of a basic “national pension” (first tier) and an additional “welfare insurance pension” (second tier). Furthermore, supplementary pensions, such as the “national pension fund” and the “individual-type defined contribution pension plan,” are available for self-employed individuals. For those covered by welfare pensions, there are additional options, including the “welfare pension fund” (third tier).
The public pension system is based on the principle of intergenerational support, meaning that insurance premiums paid by the working population fund the pension payments for the current elderly generation. However, it is projected that future working generations will face a heavier financial burden due to a declining number of younger people available to support the elderly in a society experiencing low birth rates.
The pension system undergoes major reforms every five years. The next revision is scheduled for 2025. In April 2024, the Ministry of Health, Labor, and Welfare announced five key items to review:
(1) Relaxing the requirements for joining the welfare pension.
(2) Extending the enrollment period for the national (basic) pension.
(3) Shortening the payment restriction period for the national pension.
(4) Revising the old-age pension for working elderly individuals.
(5) Raising the maximum premium limit for high-income earners.
Ultimately, only item 2 was approved during this round of revisions.
Previously, part-time employees who wished to join the welfare pension fund had to meet specific criteria, such as working for a company with more than 51 employees and working a sufficient number of hours weekly. With the relaxation of these conditions, more part-time employees can now join the welfare pension fund, allowing them to receive greater pension benefits in the future.


44 iDeCo
The term “iDeCo” refers to a private pension system (the third tier in Japan’s pension structure) that supplements the national pension (first tier) and the welfare pension (second tier). A private pension is a voluntary savings plan offered by private organizations. Initially, iDeCo targeted self-employed individuals and employees of companies without corporate pensions. However, it has since been expanded to generally include all individuals aged 20 to 65.
Participants must contribute a minimum of 5,000 yen per month, with contributions adjustable in increments of 1,000 yen. The maximum contribution limit varies depending on the participant’s occupation. Contracts cannot be canceled before age 60, and participants can only start receiving the accumulated assets after turning 60, with the latest starting age capped at 75. A potential drawback is that the payout amount depends on investment performance. However, all contributions are tax-deductible, and investment profits are exempt from taxation.
Additionally, discussions are underway to raise the age limit for eligibility from “under 65 years old” to “under 70 years old.”
As of December 2016, there were only 306,000 participants. By June 2024, this number had grown to 3.337 million. The government has announced the “Doubling Asset-Based Income Plan,” which aims to encourage a shift from saving to investing by implementing financial system reforms to increase participation in programs like iDeCo and NISA.
愛称は、 「 iDeCo (イデコ)」 です。 選定理由: ・英語表記の individual-type Defined Contribution pension planの単語の一部から構成され、個人型確定拠出年金をうまく表している。

45 Inbound Tourism Consumption and Overtourism
The term Inbound Tourism Consumption refers to the domestic spending by foreign visitors to Japan. From 2020 to 2022, it dropped drastically due to travel restrictions during the COVID-19 pandemic. However, in 2023, after the coronavirus was reclassified as a Category V infectious disease, the number of foreign visitors reached 25.07 million, and travel consumption totaled 5.36 trillion yen. A weak yen served as a strong driving force behind this recovery.
The government announced the Basic Act for Promoting a Tourism-Oriented Country, highlighting three key elements to boost inbound tourism consumption: sustainable tourism, expanded tourism spending, and promoting visits to local regions.
Meanwhile, an increasing number of areas suffer from overtourism-related issues, such as heavy traffic and loud noise caused by rising tourist numbers. In October 2023, Hatsukaichi City, Hiroshima Prefecture, began imposing a 100-yen Miyajima visit tax on visitors to Itsukushima Shrine. At Mt. Fuji, where climbers have faced numerous issues and accidents, the Yoshida Route in Yamanashi Prefecture introduced climbing restrictions and fees in July 2024. This proved effective in limiting the number of climbers. Routes in Shizuoka Prefecture have begun discussions to implement similar measures starting in 2025.
Persistent issues, such as labor shortages and the delayed adoption of digital technology—challenges that predated the COVID-19 pandemic—remain urgent issues to address in the tourism industry.


46 Household Financial Assets and the New NISA
As of March 2024, the total household financial assets of Japanese families amounted to 2,199 trillion yen, the highest in history. These assets are classified into the following categories: cash and deposits, debt securities, investment trusts, stocks, insurance/pensions/fixed guarantees, and others. The ‘cash’ category holds the largest share, accounting for approximately 50% of the assets. Investments, including debt securities, investment trusts, and stocks, make up about 20%.
The government has introduced the ‘Doubling Asset-Based Income Plan,’ which aims to stimulate the market and increase individual income by shifting deposits totaling 1,100 trillion yen into investments.
To encourage investment, the new Nippon Individual Savings Account (NISA) system was expanded and launched in 2024. According to the Financial Services Agency, the number of NISA accounts as of March 2024 reached 23.23 million, 2.1 times higher than in the same month of the previous year.
‘NISA’ refers to a system that allows individuals to invest small amounts of money without paying taxes on dividends, distributions, and capital gains from investments in stocks and trust funds. It offers two types of accounts: a ‘savings account’ and a ‘growth investment account.’ Starting in 2024, both can be used simultaneously. Additionally, the fixed tax-free holding period has been eliminated, and the account opening period has been made permanent.


47 Digital Deficit
The term ‘digital deficit’ refers to a negative balance caused by the outflow of Japanese currency to overseas digital services. Since Japanese digital services are less frequently used by foreign users, this deficit is worsening. Some are concerned that Japan could become ‘digital tenants,’ relying solely on foreign companies such as GAFA, which act as ‘landlords.’ To eliminate the deficit, it is urgent to develop Japan’s digital industry.

48 Invoice System
The invoice system began in October 2023. This system uses invoices that specify the amount of consumption tax for traded commodities to calculate the total consumption tax owed to the country. When a company trades with a taxpayer registered under the invoice system, the company receives an invoice that deducts the purchase tax amount from the consumption tax owed. This system does not apply to tax-exempt business entities, which are not registered under the invoice system.

49 Corporate Mergers & Acquisitions
Corporate mergers and acquisitions (commonly referred to as “M&A”) are strategic tools often employed in corporate management and foreign direct investment. In the United States, the proliferation of corporations during the second half of the 19th century led to the emergence of many large companies in the late 19th and early 20th centuries.
One of the main advantages of M&A is the potential for growth through the acquisition of an existing company, which can create synergy effects. However, there are instances where M&A strategies fail due to cultural differences between companies or increased costs resulting from the merger or acquisition.
In recent years, globalization has increased the significance of foreign direct investment, prompting Japanese companies to become more active in acquiring foreign firms. Conversely, there have also been cases of foreign companies attempting to acquire Japanese corporations. For example, in August, the Canadian convenience store chain Alimentation Couche-Tard Inc. made an acquisition proposal to Seven & i Holdings Co., Ltd.
M&A encompasses various methods, including Takeover Bids (TOB) and Management Buyouts (MBO). Under a TOB, individuals or entities aiming to acquire a company’s management rights publicly announce the purchase period, the number of shares they intend to acquire, and the offered price. They then acquire the shares from a broad group of shareholders. On the other hand, an MBO involves executive officers of a division or subsidiary obtaining financial backing from investment firms, such as venture capitalists, to purchase shares from the parent company and establish independence.

50 Listed Companies/Unlisted Companies
The term “listed company” refers to a company whose stocks are bought and sold on stock exchanges. In Japan, there are approximately 4,000 listed companies (excluding foreign companies).
Companies are classified not only as listed or unlisted but also into two groups based on their capital and number of employees: small and medium-sized enterprises (SMEs) and large enterprises. To become listed, a company must meet specific standards for net worth, including criteria such as capital and profits. As a result, most listed companies are large enterprises.
Listed companies benefit from having a broad pool of general investors who can purchase their stocks, making it easier to procure funds compared to unlisted companies. Additionally, meeting strict listing standards enhances their popularity and reliability, which helps them conduct transactions more effectively and attract skilled employees.
In April 2022, the Tokyo Stock Exchange (TSE) reorganized its market classifications. Previously, there were four markets: First Section, Second Section, Mothers, and JASDAQ. These were consolidated into three markets: Prime, Standard, and Growth. Some companies previously classified under the First Section did not meet the new standards for the Prime Market but were transferred to it as a transitional measure. However, by March 2026, if these companies fail to meet the required standards, they will be placed under supervision and delisted as early as October of the same year.
Moreover, the TSE revised its code of business conduct to encourage Prime Market companies to increase the proportion of female executives from 11.4% in 2022 to 30% by 2030.
