OVERVIEW OF PPP/PFI IN JAPAN3. Institutional framework(1) Summary of the “Act on Promotion of Private Finance Initiative” (PFI Act)
The PFI Act is a Japanese law that stipulates PFI projects that introduce a method of entrusting the design,
construction, maintenance, management, and operation of public facilities to the private sector.
The Law was enacted in July 1999 and stipulates procedures and regulations for the smooth implementation of
PFI projects, including the basic principles and implementation policies of PFI, special measures for lending of
national and public property, fiscal and financial support, matters related to the “committee for the promotionof PFI,” and the introduction of the “right to operate the public facility, etc.”
Purpose (Article 1 of the PFI Act)
“The purpose of this Act is to improve the social infrastructure efficiently and effectively and to ensure the provision ofaffordable and good service to the citizens by taking measures for promotion of provision etc., of the public facility, etc.,
through utilization of private finance, management abilities and technical capabilities, thereby contributing healthy
development of the national economy.”
Facilities (Article 2 of the PFI Act)

The term “public facility, etc.” as used in the PFI Act means the following facilities (including equipment):
1. Public facilities: roads, railways, ports and harbors, airports, rivers, parks, water services, sewage
systems, and industrial water supplies.
2. Official facilities: government buildings and accommodations.
3. Public interest facilities and leased housing: leased housing, educational and cultural facilities, waste
treatment facilities, medical facilities, social welfare facilities, offender rehabilitation facilities, parking,and underground malls.
4. Other facilities: Information and communications facilities, heat supply facilities, new energy facilities,
recycling facilities, tourist facilities, research facilities, transportation facilities such as vessels, aircraft,etc., and artificial satellites.
The administrator of Public Facility (Article 2 of the PFI Law)

In the PFI Act, the term “Administrator of Public Facility, etc.” refers to the national government (heads ofministries and agencies), authorities of local governments (prefectural governors, mayors of municipalities,etc.), independent administrative agencies, special corporations, and other public corporations.
Basic Principles (Article 3 of the PFI Act)“In implementing a project for the provision, etc. of a public facility, etc., its implementation is to be entrusted to
private businesses as much as possible, if the project is suitable for entrustment. In deciding the suitability ofentrusting those projects, consideration is to be given to factors such as appropriate division of roles between thenational government and local governments, efficient use of public funds; improvement in efficiency of public
administration, or efficient utilization of assets owned by the national and local governments, and; whether therevenue generated by the project will prove sufficient to pay the costs involved.”

Utilization of the Private Finance Initiative Promotion Corporation of JapanThe Private Finance Initiative Promotion Corporation of Japan, which functions as an
infrastructure fund formed through public-private partnerships, was established in
October 2013 with government and private sector investments to disseminate andpromote PFI projects, specifically the self-supporting accounting type. In Japan, afull-fledged market for the supply of risk money for infrastructure development has
not yet been established and this has been an obstacle to the financing of selfsupporting accounting type projects. The Private Finance Initiative Promotion
Corporation of Japan promotes PFI projects by providing risk money (acquisition ofpreferred stock, subordinated bonds, etc.) as a stimulus to attract private sector
investment in infrastructure projects.

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General gymnasium development& operation project (Fukuoka, Fukuoka)

OVERVIEW OF PPP/PFI IN JAPANPromotion and implementation structure

The PPP/PFI Promotion Office, Cabinet Office, Government of Japan, has jurisdiction over the PFI Act
and is responsible for promoting PPP/PFI in Japan. The office develops specific measures for promoting
PPP/PFI, such as the “Action Plan for PPP/PFI promotion,” organizing the “Committee for the promotionof PFI,” and other committees that deliberate on essential measures related to PFI, supporting local
governments’ initiatives, and work on revisions to the PFI Act.

In implementing PPP/PFI projects, departments within the ministries, agencies, local governments, andpublic corporations with jurisdiction over the facilities will carry out everything from feasibility studies tothe closing of project contracts as an implementing agency.
The Council for the Promotion of PFI
The Council for the Promotion of PFI is a special
body established within the Cabinet Office under the
PFI Act to deliberate on important matters related to
PFI, including the drafting of basic policies for PFI
projects implementation, mutual coordination among
related administrative agencies, deliberation on otheressential issues associated with PFI measures.
Chairman: Prime Minister
Members: Ministers of State other than the Chairman,
designated by the Prime Minister (all Ministers of State)
The Committee for the Promotion of PFI
The Committee for the Promotion of PFI is a committee consist of academia and people with practicalexperiences established to collect information from the expert perspective that will contribute to the soundpromotion of PFI projects, and conducting the necessary research and deliberation and overall coordination
with the government on the implementation status and opinions from private sectors.
Planning Sub-committee:
The Planning Sub-committee monitors the progressof the “Action Plan,” etc., and investigates anddeliberates on necessary revisions to ensure thereliable implementation of the plan.

Project Promotion Sub-committee:
Project Promotion Sub-committee investigatesand deliberates on measures and systems
necessary for promoting PFI, etc.

Wide area administrative union incineration plant development &operation project (Gotemba, Oyama, Shizuoka)

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OVERVIEW OF PPP/PFI IN JAPAN(2) Project Types and Project Methods
Project Types

In this section, two classifications will be explained: one from the perspective of how the PFI operator
generates revenue from the development and the provision of public services (recovery method), and the otherfrom the classification based on the “Action Plan for PPP/PFI Promotion” which is used to monitor thenumerical targets of each category.
 Classification based on the cost recovery method(1) Service Purchase typeService purchase type is a type in which the national or local
government pays a “service purchase fee” as compensation forthe public service provided by the PFI operator, and this fee
becomes the PFI operator's revenue. This type of PFI is themost widely used in Japan and often applied for constructing
public facilities such as government buildings, schools, andpublic housing, etc., where it is difficult to generate revenue
from the project. The PFI operator recovers the construction
cost through the “services purchase fee” paid by the public.

(2) Self-Supporting Accounting TypeThe self-supporting accounting type is a type in which the PFI
operator recovers the cost of construction, maintenance, andoperation through revenues from “user fees” collected from theusers of the public services provided by the PFI operator. This
type of PFI is used in constructing airport passenger terminalbuildings, public parking, etc., and in the case of the airports,
the revenue from the project comes from airport charges
collected from airline passengers, etc.

(3) Mixed type

A mixed type is a form of PFI that mixes the “service purchasetype” and the “self-supporting accounting type,” in which the
PFI operator's business revenue is derived from both theservice purchase fee paid by the public and the user fee paid by
the users of the public service. This type of PFI is applied forfacilities such as lodging facilities, hot springs, athleticfacilities, etc., which are operated by collecting user fees fromthe users. Compensation for the construction and maintenanceof the public facility is paid by the public in the form of aservice purchase fee, and during the operation period, therevenue is generated from the user fees.

Yanagishima sports parkdevelopment project(Chigasaki, Kanagawa)“Michino-eki,”” Kawano-eki” PFI project (Kannami, Shizuoka)

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OVERVIEW OF PPP/PFI IN JAPAN Categorization based on the “Action Plan for PPP/PFI Promotion”
The project categories based on the “Action Plan for PPP/PFI Promotion” is a classification unique to Japan
used to monitor numerical targets for each categories in the Action Plan, and is revised every year. The priority
of initiatives is determined for each of the four categories every year, and the scale of projects to be pursued is
set to manage numerical targets.
(1) PFI Projects utilizing the Right to Operate the
Public Facility, etc. System (Concession)(Category I)(4) Other PPP/PFI projects (Category IV)

The Right to Operate the Public Facility, etc. System(concession) is a system in which the public entity retains
ownership of public facilities, while the private operator isgiven the right to manage the facilities. It is often applied for
airports, water and sewage systems, MICE facilities, and otherpublic facilities that collect usage fees. By entrusting thefacility's operation to the private operator, including
determining usage fees, allows the public operator to operate
the business with a high degree of freedom.

(2) PPP/PFI projects which costs are recovered
through business income, such as the Co-location
and use of revenue-generating facilities ("Profit –oriented type projects") (Category II)
There are mainly two types of revenue-generating projects:
the “user fee revenue type,” which recovers costs through therevenue from public facilities, and the “private facility
attached type,” which adds private facilities to public facilities.
The revenue potential of facilities varies, ranging from thosethat can recover all of their maintenance and operation costs
through user fees and revenue-generating projects to thosethat can recover only some of their operating costs. However,even if only a portion of the costs can be retrieved, revenuegenerating projects are to be actively promoted from theperspective of contributing to the reduction of public burdens.

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Traditional PPPs such as the“designated manager systems”
and “comprehensive private sector consignment,” which
belongs to this category, are being encouraged to promote as
they are expected to play a role as the first step in the
adoption of PPP/PFI methods for local governments thathave no experience in PPP/PFI projects, and also because
they have the potential to develop into “right to operate
public facility projects” in the future. As for the “service
purchase type PFI,” which is the most widely used type inJapan, has been implemented mainly in the field of“hakomono” (public buildings), but as we move on, thescope of its use is to be expanded from "hakomono" to theinfrastructure projects.
(3) PPP projects for the effective use of public realestate (public real estate utilization projects)(Category III)By effectively using underutilized public real estate, it isexpected that public-private partnerships will create morevitality in the city, enhance the "value" of the region, andcreate new investment and business opportunities. In recent
years, there have been many examples of projects in whichsurplus land is created by the reorganization andconsolidation of public facilities by the private operator in
conjunction with the development of public facilities.

OVERVIEW OF PPP/PFI IN JAPAN

Project Methods
There are several PFI project methods, such as BTO, BOT, BOO, and RO etc., depending on the ownership ofthe facility and the scope of the contract.

BTO method（Build Transfer and Operate）

The “BTO” is a method in which the private sector designs andconstructs a facility (Build) and then transfers ownership (Transfer)to the public immediately after completion. Then the private sector
maintains and operates the facility (Operate).

BOT method（Build Operate and Transfer）

In the “BOT” method, the private sector retains ownership of the
facility from the design and construction (Build) to the maintenance,
management, and operation (Operate) of the facility and transfers
ownership to the public after the project (Transfer) is completed.
Since the private operator retains ownership of the facility
throughout the project period, it has the advantage of allowing
flexible management of the facility.

BOO method（Build Operate and Own）

RO method（Rehabilitate Operate）

Unlike the “BOT” method, the facility’s ownership is not transferredto the public after completing the project, and the project is either
continued or terminated by removing the facility.

“RO” is a method in which the private sector raises its funds,
renovates and repairs the existing facilities, and operates them.

The Right to Operate Public Facilities, etc., method“The Right to Operate Public Facilities, etc.
method” is a method in which the public entity
retains ownership of the facility, while theprivate operator is given the right to operate thefacility. The public entity delegates the facility’s
management, including the determination ofusage fees, to the private operator, allowing theprivate operator to operate the facility with ahigh degree of freedom. Operating rights can beestablished for both existing and new facilities.
The operating rights are recognized as property
rights that can be transferred, and the financial
institutions can establish mortgages on theoperating rights for public facilities, which has
the benefit of facilitating financing. In Japan,“the right to operate public facilities system” wasintroduced in 2011 with the revision of the PFI
Act. To date, 41 projects have been successfully
implemented in various sectors, including
airports, sewerage plants, etc., as a result ofintensive efforts to promote the system as apriority area in the Action Plan.

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OVERVIEW OF PPP/PFI IN JAPAN(3) Action Plan for PPP/PFI Promotion
The "Action Plan for PPP/PFI Promotion" has its origin in the "Action Plan for Fundamental Reform of
PPP/PFI" determined by the Council for the PFI in June 2013. It is a comprehensive plan for the government’s
effort to improve the necessary environmental arrangements, provide support to local governments, and develop
systems by compiling the necessity of institutional responses and specific measures to be newly implemented as
an action plan. Every fiscal year, the PPP/PFI Promotion Office reviews and improves the priorities according to
the progress made with the major measures that were taken previously.
(4) Guidelines, Manuals, etc.
The PPP/PFI Promotion Office prepares guidelines, manuals, case studies, etc., as tools to support the
introduction and smooth implementation of PPP/PFI methods and provides the information widely through its
website. ( https://www8.cao.go.jp/pfi/ ) Each ministry, agency, prefecture, and ordinance-designated city also
prepares its own guidelines to provide guiding principles, etc., to promote the use of PPP/PFI methods.

<Guidelines and manuals etc., published by the PPP/PFI Promotion Office, Cabinet Office>
Guidelines and Manuals

Date of
Revision

Guidelines on PFI Projects Implementation Process

2021/6

Guidelines on Risk Allocation, etc. in PFI Projects

2021/6

The Guidelines on Value for Money (the VFM)

2018/10Contract Guidelines - Key Points on PFI Project Contracts

2021/6

A Guideline for Monitoring

2018/10

Guidelines on the Right to Operate the Public Facility, etc. and the Public Facility, etc.,
Operating Project2021/6Manual for feasibility study simplification for PPP/PFI

2019/3Manual for Simplifying Procedures for Implementing Service Purchase-Type PFI
projects for local governments

2014/6Manual for Private Sector Proposal for PPP/PFI Projects

2021/4Ex-post evaluation manual for PFI projects

2021/4Manual for Regional Platform Operation

2017/3

Guidance on PFI Project Introduction

2003/3

Guidance on Developing Rules for Priority Consideration for the Introduction of
PPP/PFI Methods
Guidance on Operating Rules for Priority Consideration for the Introduction of
PPP/PFI Methods
Basic approach to non-ownership methods for public facilities

2016/32017/12021/4Former Kanda Family attached townhouses project (concession)(Tsuyama, Okayama)

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OVERVIEW OF PPP/PFI IN JAPAN(5) Support measures for promotion
To promote PPP/PFI methods, the government implements various support measures for local governments.
This section explains the main support measures provided by the PPP/PFI Promotion Office.
1. Operational Support for the “Rules for Priority
Consideration.”“Rules for Priority Consideration” stipulate that PPP/PFI
methods shall be considered over conventional methods
when developing public facilities, etc. The rules serve as
the basic framework for promoting PPP/PFI projects inlocal governments, enabling verification of the optimal
methods by comparing PPP/PFI methods withconventional methods for projects above a certain size. In
addition, evaluation details are made public, ensuring
objectivity and accountability to the public. The PPP/PFI
Promotion Office continuously supports developing
specific projects through the formulation and theapplication of the rules to promote practical priority
studies, including follow-up on the status of formulationand sharing good practices carried out by local
governments.

Other Supports•

A system to dispatch PPP/PFI administrative experts tolocal governments by certifying and registering local
government officials as “PPP/PFI administrative practiceexperts” who possess extensive practical experience andachievements in administrative practices, such as theestablishment of internal promotion systems and rules forconsideration, budgetary responses, parliamentary
responses, and internal consensus building.

•Financial support for PPP/PFI consideration studies
covering initial costs of feasibility studies, etc.,
required when implementing the PPP/PFI projects.

•

The “One-Stop Window System” established in thefiscal year 2018 with the revision of the PFI Act is asystem that allows the administrator of public facilities,
etc. and a private business operator seeking to
implement a PPP/PFI project to collectively inquire andconfirm the details of support measures and theapplicability of regulations via the One-Stop Window
established within the PPP/PFI Promotion Office.

2. Support for the formation of “Regional
Platforms.”“Regional platforms” is a framework that enables local
private sector operators, local financial institutions, local
governments, experts, and other parties familiar with theissues and conditions of the region to gather, acquire knowhow, and exchange information to improve the ability toform PPP/PFI projects. In addition to training and study
sessions to acquire know-how, the regional platforms reflect
the opinions of local private sector businesses by holding
public-private dialogues on specific projects. By sharing
information on projects in the pipeline at an early stage, theplatform is effectively used to draw out the planning,proposal, and project execution capabilities of private
sectors.
3. Support for Dispatching PPP /PFI Experts
To promote the autonomous formation of PPP/PFI projects
in local governments, the PPP/PFI Promotion Office
implements a system to dispatch experts with specialized
knowledge, know-how, and experience to support local
governments and other organizations engaged in PPP/PFI
projects. The office holds seminars to study the basic
concepts and approaches of PPP/PFI methods, introducescase studies of projects that have been implemented in thepast, and provides consultation on questions and issues
related to the introduction of PPP/PFI methods for the
projects under consideration.

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OVERVIEW OF PPP/PFI IN JAPAN4. Supporting Public Agencies in overseas business
JICA - Japan International Cooperation Agency JICA, as the centralized agency for Japan‘s official development assistance, has 15 offices in Japan and about 100 overseas
and is currently implementing ODA projects in more than 150 countries and regions. Utilizing the local information andextensive network accumulated through ODA projects, JICA continuously provides support from upstream including thedevelopment of PPP-related laws in developing countries, as well as support through feasibility studies and financing for the
implementation of overseas PPP projects executed by local government and private companies. Specifically, JICA has
developed comprehensive schemes to support developing countries through Overseas Investment Loans for projects withhigh economic impact executed by private companies and yen loans such as Equity Back Finance (EBF) loans, Viability
Gap Finance (VGF) loans, and PPP infrastructure credit enhancement stand-by loans for PPP projects implemented bygovernments of developing countries. JICA also provides support for the implementation of preparatory studies, which assist
in the development of business plans based on proposals from companies that plan to implement projects utilizing Overseas
Investment Loans.
■URL https://www.jica.go.jp/english/index.html

JBIC - Japan Bank for International Cooperation JBIC, a public institution wholly owned by the Japanese government, aims to complement the financing provided by privatesector financial institutions, while 1) promoting the overseas development and securement of resources which are importantto Japan, 2) maintaining and improving the international competitiveness of Japanese industries, 3) promoting the overseas
business having the purpose of preserving the global environment, such as preventing global warming, and 4) preventing
disruptions to international financial order or taking appropriate measures with respect to damages caused by such disruptions.
JBIC's objective is to contribute to the sound development of Japan and the international economy and society by conducting
its operations in the four areas mentioned above. To achieve its objectives, JBIC provides support for the overseas
development of Japanese companies and for the improvement of the business environment in host countries through a menu
of financial services, including export loans, import loans, overseas investment loans, untied loans, and equity participations.
■URL

https://www.jbic.go.jp/en/index.html

NEXI - Nippon Export and Investment Insurance NEXI is a 100% government-owned special stock company, and is the only public agency in Japan responsible for tradeinsurance. NEXI’s trade and investment insurance covers risks associated with international trade and other overseas
transactions that cannot be covered by private-sector insurance. The purpose of trade and investment insurance is to support
and promote companies on overseas business development by mitigating the risks associated with foreign trade and overseas
investment. The main types of NEXI’s trade and investment insurance are 1) Export Credit Insurance, which covers losses
resulting from inability to collect payment after the cargoes have been shipped or after the technology has been provided, 2)
Overseas Investment Insurance, which covers losses incurred by Japanese companies with a subsidiary or a joint venture in aforeign country if the subsidiary or joint venture is forced to discontinue business due to force majeure and 3) Loan Insurance,
which covers losses incurred by Japanese companies, banks, and other institutions, that provide a foreign government orcompany with business funds for overseas projects, if they are unable to collect the loans. In December 2020, in response to
the Covid-19 pandemic and its consequences, NEXI launched a new business strategy called “LEAD Initiative”. It aims toproactively support financing projects that will contribute to achieving carbon neutrality and SDGs.
■URL

https://www.nexi.go.jp/en/index.html

JOIN - Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development JOIN is a public-private infrastructure investment fund company established in 2014, specialized in overseas infrastructure
projects such as transportation and urban development. JOIN’s aim is to promote active entry of Japanese companies into
overseas markets for projects that utilize Japanese knowledge, technology and experience, and contributing to the sustainablegrowth of the Japanese economy. JOIN not only provides equity, but also provides supports such as dispatching executives tothe projects. There is no limitation on the areas and countries (developed or emerging) and JOIN can provide consistent
support to projects, from the project development stage (greenfield) to the business operation stage, O&M (brownfield). JOIN
aims to actively promote support not only for typical transportation and urban development projects, but also for new
technology fields such as smart cities, TOD/public transport-oriented development and MaaS, as well as for a wide range ofinfrastructure fields that support these projects.
■URL

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https://www.join-future.co.jp/english/

OVERVIEW OF PPP/PFI IN JAPANJICT - Fund Corporation for the Overseas Development of Japan's ICT and Postal Services –JICT is a public-private fund established in 2015 with investments from the Japanese government and private businesses.
While considering the subsidiarity nature with the private businesses, JICT supports those who are engaged in doing
business overseas in telecommunications, broadcasting, postal services, and to those who support these businesses, and asof the end of December 2021, a cumulative total of 78.4 billion yen has been provided in support as funds and loans.
Telecommunications, broadcasting, and postal services are regulated sectors, and there are various risks involved in
conducting these businesses overseas. To achieve its objective of contributing to the sustainable growth of the Japanese
economy by improving the profitability of Japanese businesses, JICT bears a portion of the risk and provides investment
and hands-on support from the stage of project identification and formation to post-investment business operations, incooperation with related organizations, and promotes the overseas development of Quality Infrastructure through the
expansion of the supply of risk capital.
■URL https://www.jictfund.co.jp/en/

Moray East Offshore Wind Power Generation Project (UK)

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16

Section 2
Project Profile

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Domestic Projects
０１ Public Sewage Treatment Plant in Hamamatsu

SEWERAGE

０２ Effective use of Sewage Sludge at the Southern Sludge Recycling Center in Yokohama

SEWERAGE

０３ Biomass Recycling Facility in Kurobe Sewage Treatment Plant

SEWERAGE

０４ Composite-type Biomass Facilities in Toyohashi City

SEWERAGE

０５ Kitanagoya Waste Treatment Plant Project

WASTE
MANAGEMENT

０６ Tokyo International Airport International Zone Development

AIRPORT

０７ Sendai Airport Operation Project

AIRPORT

０８ Sawara Wide-area Exchange Center PFI Project

RIVER

０９ Tama Regional Core Hospital and Chidren’s Medical Center
１０ Takeshiba District Urban Renewal Step-up Project１１ Minato Mirai 21 Central District 20 City Blocks Meeting & Event Facility Development Project

HOSPITALURBAN
DEVELOPMENT

MICE
GOVERNMENTBUILDING

１２ Central Government Building No.7 Development
１３ Osaka Toyonaka Shin-Senri Higashi Housing Project

HOUSING

Overseas Projects
１４ Nam Ngiep 1 Hydropower Project

ENERGY

１５ Dariali Hydropower Plant

ENERGY

１６ Meghnaghat Natural Gas-Fired Combined Cycle Power Plant

ENERGYWASTEMANAGEMENT

１７ Dubai Energy-from-Waste Project１８ Water Purification Plant in Cambodia

WATER

PPP/PFI
Project Profile

１９ Chinggis Khaan International Airport Construction and Operation Project

AIRPORT

２０ Toll Road Business in India

ROAD

２１ Toll Road Business in Indonesia

ROAD

２２ Lach Huyen Port Construction Project

PORT
TRANSPORTAIONRAIL

２３ Intercity Express Programme
２４ The Başakşehir Çam & Sakura City Hospital PPP Project

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HOSPITAL