3. Relationship between the Financial Statistics of Social Security and the System ofNational Accounts1
The "Basic plan concerning the development of official statistics" (Cabinet decision on March 13,2009) requires that the Cost of Social Security is consistent with other statistics compiled based oninternational standards. Reflecting this requirement, when the Financial Statistics of Social
Security was specified as Fundamental Statistics based on the Statistics Act, it was decided toprovide explanations on the relationships between the Financial Statistics of Social Security and theSNA in order to serve the convenience of the statistics users.
. Differences in the areas covered
The Financial Statistics of Social Security provides aggregated data on receipts and expenditure in
the areas of social security. Therefore, it is required to cover all receipts and expenditure relevant
to social security with no omissions. On the other hand, the SNA provides aggregated data on theeconomic activities of a nation including those relating to social security.
. Differences in the meaning and the usage of the term "social security"
In the "Annual Report on the System of National Accounts" published annually by the Cabinet Office,Government of Japan, terms such as Social Benefits, Unfunded Employee Social Benefits, SocialAssistance Benefits, and Social Security Contributions are used in Appendix Table 9"Transfers from General Government to Households (Social Security Transfers)" and Appendix
Table 10 "Social Security Contributions, which are compiled for the purpose of describing the23transactions between households and general government. However, it should be noted that themeaning and usage of the term "social security" in this report are not necessarily the same as inthe Financial Statistics of Social Security.
4For example, taxes are included in social security revenue in the Financial Statistics of Social
Security (see Table 12), while in the SNA, they are regarded as transfers toward social security
funds that constitute the general government. Thus, in the SNA, taxes are included in the"Account classified by the Sub-sectors of General Government" in Appendix Table 6, which iscompiled for the purpose of describing receipts and payments by sub-sectors of the general
government, but not in the "Social Security Contributions" in Appendix Table 10, which iscompiled to describe the direct contributions of employees and employers.
. Differences in the aggregation of data on expenditure
As shown in the upper half of Reference Figure 1, the total amount of expenditure in the Financial
Statistics of Social Security is not the same as the sum of social security transfers from the general
government to households given in Appendix Table 9 in the SNA. The main reason for this is
the difference of coverage between the two statistics. For example, while schemes such as
the Employees' Pension Fund and the Former Public Corporation Staff's AccidentCompensation are included as part of the social security system in the Financial Statistics ofSocial Security, they are classified as a private sector activity in the SNA, and, therefore, they areincluded in Appendix Table 9 that describes the transactions between households and the generali

government. In fact, the Employees' Pension Fund and the Former Public Corporation Staff's
Accident Compensation are not included as independent schemes in any of the statistical tables in5

the SNA .

Reference Figure 1 Comparison between the Financial Statistics of Social Security and the SNA

Financial Statistics of Social Security

System of National Accounts[Social Expenditure/Social Benefit](1) Benefits distributed to individuals(2) Facility maintenance, etc.6[Social Benefit] (Appendix Table 9 in the Annual
Report)(1) Social Benefit (Social Security Funds 7)(2) Unfunded Employees’ Social Benefit 8(3) Social Assistance Benefit 9*Employees’ Pension Fund, etc. are classified in
the private sector.
*Childcare services that are not financed bypublic expenditure are classified in the final
consumption expenditure of the general
government and private non-profit institutionsserving households.

[Social Security Revenue](1) Social insurance (contribution from insured
persons and employers)(2) Taxes (state participation and otherauthorities’ participation)(3) Other income (income from capital andothers)[Social Security Contribution] (Appendix Table
10 in the Annual Report)
Insurance contribution, etc. toward the Social
Security Funds*Taxes contributed to the Social Security Funds
are classified in the current transfer within thegeneral government. 10Items with the asterisk (*) mark in Reference Figure 1 are included in the entire aggregation. Amounts
that are broken down are not published, and, thus, it is not possible to extract these amounts separately.
. Differences in the aggregation of data on income
As shown in the lower part of Reference Figure 1, the total amount of revenue in the Financial
Statistics of Social Security is not the same as the sum of social security contributions (AppendixTable 10) in the SNA. This disparity is mainly because the social security contributions covered by
Appendix Table 10 in the SNA only include insurance contributions. Similar to Appendix Table 9,
Appendix Table 10 in the SNA only covers the transactions between households and the general
government. Therefore, categories of social security revenue in the Financial Statistics of Social
Security except for insurance contributions such as taxes, other income and receipts from thereserve fund, are not included in the SNA. This indicates that taxes that contributed to various
schemes such as the Basic Pension are not included in Reference Table 10 in the SNA, and, thus,iithere is a large gap between the total amount of revenue in the Financial Statistics of Social
Security and the sum of social security contributions in Appendix Table 10 in the SNA. As
described earlier, since the SNA aggregates data on the economic activities of a nation with noomissions, taxes are recorded not in Appendix Table 10 but in Appendix Table 6 as current
transfers from the central and local governments to the Social Security Funds. In addition, there
is a difference in the range covered by the two statistics: As only the transactions between
households and the general government are included in Appendix Table 10 similar to Appendix
Table 9, Appendix Table 10 does not include the Employees' Pension Fund and the Former PublicCorporation Staff's Accident Compensation, which are classified as private sector activity in theSNA.

The difference in the aggregation method used in the Financial Statistics of Social Security andthe SNA is another cause of the discrepancy between the income data in the two statistics.
Looking at long-term care insurance as an example, in the Financial Statistics of Social Security,
only the contributions from the primary insured (aged over 65) are included in the "contribution
from insured persons," whereas the contributions from the secondary insured (aged 40-65) arecounted as contributions toward the health insurance system to which each insured personbelongs. On the other hand, in the SNA, all the contributions of the people belonging todifferent health insurance systems allocated to long-term care insurance are included as"contribution from insured persons" of the long-term care insurance. Thus, the difference arises inthe amount of the apparently the same item, namely, "contribution from insured persons in longterm care insurance." In order to avoid any overlaps, social contributions to each health insurance
system in the SNA exclude any amount counted toward long-term care. The contributions by
Category II insured persons are shown in Table 16 of Appendix 4, reported by insured persons andby employers.

Reference Figure 2 Allocation of the Social Insurance Contribution for Long-term Care InsuranceThis is the range dealt with as“long-term care insurance” in the
Financial Statistics of Social
SecurityThis part is allocated to each healthinsurance in the Financial Statisticsof Social Security

Primary insured

Secondary insured

This is the range dealt
with as “long-term careinsurance” in the SNA. Differences in the Financial Statistics of Social Security and SNA's Social Security <Otherreasons>
There are other various differences in the two statistics. For example, a part of the SNA datacontains estimates, and refunds are included in the SNA but not in the Financial Statistics of SocialSecurity.

iii

The SNA is published in three stages: the prompt report, definite report, and final report. At thestage of publishing the definite report, the SNA still contains figures estimated from past data
because the financial statements and annual reports of relevant projects necessary to finalize thefigures are not yet published: the estimated figures will be replaced with real data in the finalreport. Institutional data on the National Health Insurance, Elderly Health Insurance, and Longterm Care Insurance are estimated in the definite report, so there is a certain difference in the data
recorded in the definite and final reports. In addition, refunds are not included in the Financial
Statistics of Social Security because they are not used as actual benefits or contributions; inaddition, the data must be accounted retrospectively. On the other hand, these amounts areincluded in the SNA, as it is records the economic activities of a nation without omissions oroverlaps. In the Financial Statistics of Social Security, data are aggregated by the cumulative
method using the settled figures. On the other hand, in the SNA, estimates and corrections of
the necessary figures are conducted based on the international criteria defined by the UnitedNations. Thus, the divergence in the figures in the two statistics is caused by the technical andpractical differences in the aggregation method as well.
The revision of the SNA in 2005 increased subdivisions of the general government's expenditureby function. Specifically, each of the 10 categories (general public services, defense, publicorder/safety, economic affairs, environmental protection, housing/community amenities, health,recreation/culture/religion, education, and social protection) in Appendix Table 7 "GeneralGovernment total outlays by function (Classification of the Functions of Government: cofog)" wasfurther divided into subcategories. In particular, the categories of health and social protection thatare closely related to the Financial Statistics of Social Security are further classified inAppendix Table 7. Data on the national health expenditure are used for the subdivision of thecategory of health. The subdivision of the area of social protection shares common features withthe functional classification and classification by social policy area in the Financial Statistics ofSocial Security. If the SNA criteria are revised in the future, necessary examinations will beconducted regarding the relationship between these areas.
Reference Table - Annual Report on the System of National Accounts, Appendix Table 7. General
government total outlays by function
7.
7.1
7.2
7.3
7.4
7.5
7.6

HealthMedical products, appliances, and equipmentOutpatient services
Hospital services
Public health services
R&D health
Health n.e.c.

10.
10.1
10.2

Social protection
Sickness and disability
Old ageiv

10.3
10.4
10.5
10.6
10.7
10.8
10.9

Survivors
Family and children
Unemployment
Housing
Social exclusion n.e.c.
R&D social protection
Social protection n.e.c.

Information Social Benefit, the relevant statistics, etc.. are published as "Social security researchmaterials" on the homepage of the National Institute of Population and Social Security
Research.
1

SNA is specified as Fundamental Statistics based on the Statistics Act. The statistics are compiled
based on the standard and method of the SNA, while following the international standards defined by
the United Nations, in order to systematically record the complete picture of the Japanese economy
in a way that allows international comparison. (http://www.esri.cao.go.jp/jp/sna/menu.html)
2
Households represent consumers excluding private companies.
3
The general government constitutes the following three organizations: the nation as the central
government, autonomous bodies as local governments, and social security funds.
4
Taxes represent state contribution and other public contribution, namely, local authorities' contributions.
5The Coal Mining Pension Fund and the Japan Iron & Steel Corporation Yahata Mutual Association wasonce classified into the private sector. However, since the SNA standard was revised in 2005 and thecriteria "There is no link between benefits and contributions" that defined Social Security Funds
was eliminated, these schemes are now classified as Social Security Funds.
6
Social Expenditure based on the OECD Standards covers both (1) and (2) listed above. Social Benefit basedon the ILO Standards covers only (1).
7Social Security Funds are organizations that fulfill two requirements: (1) The purpose of theorganizations is to provide social benefits to the entire or most part of the society, (2) The
affiliation to the organizations is required by law. Both the central and local governments
constitute the general government, to which the special account for social insurance (pension andemployment insurance), mutual associations (mutual associations for national and local public
service employees, etc.), and health insurance associations correspond.
8Unfunded Employee Social Benefit is a welfare benefit that employers pay to their employees from theirown sources without using external organizations, such as the Social Security Funds andfinancial institutions (pension funds), or establishing their own fund. Employers take theresponsibility of paying the benefit even if there is no specific fund.
9Social Assistance Benefits refer to the transfer from the general government and private non-profit
institutions serving households to households that are not operated through the social security system.
Transfers from the general government include the Public Livelihood Assistance, Atomic Bomb Sufferers'
Medical Care expenses, Survivors’ Pension, and pensions for public servants, while transfersfrom private non-profit institutions serving households include free scholarships.
10Current transfers within the general government consist of the current transfers among the subsectors of the general government. Specifically, it refers to the current transfers between different
governments, such as the central government and local governments, Social Security Funds and localgovernments, and central government and Social Security Funds. However, transferring funds for theGross Fixed Capital Formation is counted as a capital transfer.
(The notes above are quotations from relevant parts of the "Description of terms" in the "Annual
Report on the System of National Accounts" published by the Cabinet Office, Government of Japan.)v