Japanese Healthcare Expenditures in a Comparative Context

Japan’s total fertility rate is very low (1.29 in 2003), and Japanese life expectancy is among the highest (78.4 years for males and 85.3 years for females at birth in 2003) in developed countries. Consequently, the population is aging rapidly, which has had a heavy impact on welfare state reform in Japan. In European healthcare reforms, early reforms in the 1980s emphasized cost containment; the characteristic of the 1990s was an attempt to promote efficiency by introducing competition and markets into health care; the focus has switched towards effectiveness in the early years of the new century (Smith, 2004). Japanese health expenditures as a percentage of GDP are low among major developed countries, which might imply the efficiency of the Japanese healthcare system. Following the launch of universal public health insurance cover-age in 1961, the benefit level improved considerably in the 1960s and the 1970s. Cost containment became the main objective of health system reforms in the 1980s, and quality care emerged as among the most important objectives thereof in the 1990s. Moreover, an annual increase of 1 trillion yen or more in national health expenditures has had a significant impact on Japan’s national budget. In this paper, after reviewing characteristics of the Japanese healthcare system, we discuss factors responsible for the relatively low healthcare expenditures in Japan. Such an argument is also discussed in a comparative context as to why the Japanese healthcare system needs structural reform to be more effective, sustainable, and user-friendly.