【Aging, safety net and fiscal crisis in Japan】No.17: Social Welfare Corporation

In this column series, Yukihiro Matsuyama, Research Director at CIGS introduces the latest information about aging, safety net and fiscal crisis in Japan with data of international comparison.

In Japan there are social welfare corporations as a private organization that plays a role of a safety net. These organizations are tax exempt because it operates facilities for the elderly, nursery schools, orphanages, facilities for the disabled, maternal and child care facilities, hospitals in lieu of the government, and has received huge subsidies. Currently the number of these corporations is about 20,000, of which about 18,000 operate some welfare facilities.

However, the social welfare corporation's financial statements have not been compiled since the establishment of the system in 1951 so that no figures are available on the market size. Therefore, Canon Institute for Global studies (CIGS) gathered and analyzed the financial statements of about 1,200 social welfare corporations in 2011 and as a result, discovered various problems. For example, among balance sheets submitted by social welfare corporations to the regulatory agencies (prefectures or cities, wards), there was a considerable number of sheets in which debit and credit do not balance. One third of social welfare corporations that operate facilities for the disabled have an operating margin of over 10%. There are corporations that accumulate net financial assets (after deducting borrowings) of more than twice their annual budget.

These problems were pointed out in the Diet and the law was amended in March 2016. One of the main points of reform is that the government collects financial statements from all social welfare corporations, builds a database and discloses it to the public. This is to be started from the financial statements of FY 2016, and MHLW is currently compiling the work. Prior to that, CIGS counted approximately one-third of the social welfare corporation's 2015 financial statements to make it useful for database design. Table 1 shows an average operating margin by facility type. CIGS estimates that social welfare corporations as a whole have an annual surplus of more than 300 billion yen and a net financial asset of more than 2 trillion yen.

Table1 Operating margins of social welfare corporations(in FY 2015)


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