Feasibility Studies under the System for Evaluating Government Policies in Japan
Chigako Yamamoto, Ph.D. (Engineering), Gradus Multilingual Services, Inc.
Prof. Kei’ichi Sato, Graduate School of Engineering, Hokkaido University

1. Introduction
This report examines feasibility studies on government projects that are carried out under the systemfor evaluating government policies in Japan, especially in terms of how such studies address
cost-benefit analyses. To this end, the report outlines the legal framework and history of feasibility
studies under such system and introduces cases of projects subjected to feasibility evaluation.
The feasibility studies conduced under the system for evaluating government policies in Japan arecharacterized by 1) mandatory cost-benefit analysis, 2) application to new and ongoing projects, and
3) use in deciding whether to continue or terminate projects.
This report defines “feasibility study” as “the comprehensive evaluation of government projects,
including cost-benefit analysis; the analysis of customer needs; and the implementation of engineering
surveys.”
Government policy in Japan has begun to be evaluated at the prefectural government level. The
system began as one for reassessing or conducting interim evaluations of ongoing projects. The firstattempt at such evaluation was done by the Hokkaido prefectural government in 1997, under a policy
for assessing projects for which a long time had passed since inception. The policy was called
Project Assessment by Time.1)
Such a movement was not limited to the local level. The central government, recognizing theimportance of such a system, quickly established the Government Policy Evaluations Act (GPEA)2) in
2001, to provide a legal framework for evaluating government policies. The GPEA aims to achieve
accountability, to promote efficient, high quality government services and projects, and to ensure thatthe outcomes of these services and projects meet the needs of the nation.
The GPEA calls for all government policies, programs and projects, in principal, to be assessed before
their inception (ex-ante evaluation) and to be evaluated after their completion (ex-post evaluation), andto be reassessed or subjected to interim evaluation when necessary. Ex-ante evaluation, including
cost-benefit analysis, is comprehensive. Such comprehensive analysis is also required for interim
evaluation when social circumstances have changed drastically since the project inception.

2. Structure of the Japanese Government
This section outlines the structure of Japanese government as background for discussing governmental
project evaluations. The Japanese government is structured as a pyramid with 1,804 municipalities
athe base, 47 prefectures above these, and 11 central government ministries above these (Figure 1).
Government projects are classified by government level. Prefectural and municipal projects areroughly classified as those exclusively financed by the local government or those subsidized by higher
levels of government. The Japanese law for a system for evaluating government projects mandates
evaluations for all projects administered or subsidized by the central government.
This paper was presented at “Improving Public Expenditure Management for Large-Scale Government Projects: Focusing on a Feasibility
Study” hosted by the World Bank and Korea Development Institute and held in Seol, Korea on May 22-23, 2007.
Contact: Gradus Multilingual Services, Inc.
e-mail: chigako.y@gradus.net

URL: http://www.gradus.net/

1•Project categories by source of funds

Cabinet
Ministries (11)Agencies & offices

Central government projects

Centralgovernment

Prefectural government projects:- exclusively financed by the prefecture- subsidized by the central government

Prefectural
governments (48)

Municipal governments (1,804)

Figure 1.

Municipal government projects:- exclusively financed by the municipality- subsidized by the prefecture and/or central
government

Japanese governmental structure

3. History of Development of the System for Evaluating Government Policies
3.1 The first system for local-level interim evaluation
As one of the first attempts to evaluate government policies, programs and projects, the Hokkaido
government developed the policy of Project Assessment by Time. Projects for which a long time had
passed since inception without completion were evaluated using “time” as the key evaluation item.
The policy achieved remarkable results by causing the suspension or termination of longstanding
incomplete projects whose necessity had become uncertain. Then, the Hokkaido prefectural
government introduced the System for Evaluating Government Policies on a trial basis in 1998.
Following that trial, the system was officially introduced in 1999. All projects of the Hokkaido
prefectural government became subject to ex-ante, interim and ex-post evaluation.
The Mie prefectural government started designing a system for evaluating ongoing projects in 1995.
The system was introduced in 19983). The Hokkaido, Miyagi, and Akita prefectural governments
each established ordinances (local government laws) for a system for evaluating government policies
in 2002.
There are two main reasons the system was introduced first at the local level rather than at the national
level: 1) local governments are closer to their customers than is the central government, so it is easierfor local governments to understand whether government projects meet customer needs, and 2) it iseasier for local governments to reform their policies, because local bodies are smaller in scale thannational bodies, and governors have more discretion in exerting leadership.
Interim evaluation for ongoing projects was first introduced because government financial reforms4)
were planned for FY2004, after which financial assistance from the central government was expected
to be drastically reduced5). In fact, prefectural governments foresaw serious financial constraints, andthey faced the need to improve project efficiency and reduce the costs of ongoing projects. They alsobegan to consider terminating longstanding incomplete projects whose necessity had become uncertain2

because of socioeconomic changes.
3.2 Trans-Hidaka Prefectural Road (Hokkaido): The suspension of a large-scale project
Until 1998, when The Decentralisation Promotion Plan6) was decided by the Cabinet, local
governments had difficulty terminating longstanding projects that had been subsidized by the central
government. This was because they were afraid of being forced to repay subsidies that had been
invested in the projects. The Decentralisation Promotion Plan allowed local governments toterminate such projects without repaying the subsidies when the projects fulfilled certain conditions.
One such condition is the evaluation of the project by a steering committee, under the system forevaluating government policies.
The Hokkaido prefectural government established a system for evaluating government policies thatconsists of ex-ante evaluation, interim evaluation and ex-post evaluation. It established anothersystem for evaluating longstanding projects, called Specified Project Evaluation7), which is the
successor of Project Assessment by Time. The Trans-Hidaka Prefectural Road8) was a large-scale
project that was suspended in 2004 under Specified Project Evaluation after 18 years of construction.
The Trans-Hidaka Prefectural Road (101.2 km) was planned to be an arterial prefectural highway overthe Hidaka Mountains, linking Shizunai Town in the Hidaka district and Nakasatsunai Village in the
Tokachi district (Figure 2). The mountain section (25.3 km), which was to include a tunnel, wasbeing constructed under the authority of what is now the Hokkaido Regional Development Bureau of
the Ministry of Land, Infrastructure and Transport (MLIT) (Figure 3). The planned road would havebeen more convenient in winter than the two existing routes, because it would have passed over the
Hidaka Mountains at lower elevations. In cold, snowy Hokkaido, drivers suffer from severe winterdriving conditions, especially at mountain passes. Construction started in 1984, and by FY2002, theprefectural and central governments had spent a total of 54 billion yen. However, only 40% of the
two-lane, paved road was complete. Additional construction costs of 98 billion yen were estimated,and construction was expected to require an additional 35 to 40 years.

Figure 2.

The Trans-Hidaka Prefectural Road, and two other routes over the Hidaka Mountains

3

The Specified Project Evaluation process of the Trans-Hidaka Prefectural Road conducted by the
Hokkaido prefectural government included reassessment of the construction costs, but not cost-benefit
analysis. Suspension of the road project arose from changes in the investment priorities of projects
as a result of socioeconomic changes. Those changes were progress in construction of the Hidaka
section of the Trans-Hokkaido Expressway, which had not been anticipated when the Trans-Hidaka
Prefectural Road was planned, and financial constraints from economic stagnation and financial
reforms of the central government. This was the first suspension – actually, a termination – of alarge-scale ongoing project in Japan, and it generated much political discussion.
3.3 Introduction of the system at the central government level
Introduction of the system for evaluating government policies at the central government level was firstsuggested in the Final Report of the Administrative Reform Council9) in 1997. The establishment ofsuch a system was included in the Basic Law for the Reorganization of Central Government Ministries
and Agencies (1998). The National Government Organization Law and laws for the establishment ofeach ministry were amended in 1999, whereby evaluation of central government policies, programs
and projects became mandated. In December 2000, the Cabinet decided to introduce systems forevaluating government policies as an essential part of comprehensive structural reform of government.
A guideline for such a system was established in time for the organizational reform of the central
government in 2001. Finally, the GPEA, which had been enacted in June 2001, took effect in April
2002. The time required to draft and pass the legislation was only four and half years after the final
report by the Administrative Reform Council, which was much shorter than for similar processes inother countries10).
Each ministry was required to establish basic guidelines for implementing policy evaluations, whereby
reports of evaluations their implementation were made open to the public.

4. System for Evaluating Policies of the Central Government
The system includes ex-ante and ex-post evaluation, and interim evaluation when necessary.
Depending on the project objectives, evaluation items are selected from the following principal
evaluation criteria. The GPEA does not specify assessment/evaluation methodologies, but suggests
choosing technically applicable, proper methodologies.
Principal items for evaluating a policy, program or project11)
Necessity:

Is the objective proper? Is the policy, program or project necessary?
Should the policy, program or project be done by the government?
Efficiency: Will the output meet or exceed the input?
Effectiveness: Will the policy, program or project achieve the expected outcomes?
Equitability: Will the burdens/outcomes be equitably distributed?
Priority:
In light of the above, should the policy, program or project have high priority?
The system for evaluating government policies in Japan is characterized by the following.10),12)1) Mandatory evaluation based on the law:
Evaluation of government activities is mandated by national law (the GPEA). In contrast, othercountries have introduced systems to evaluate government activities by means other than law, such aspresidential order, cabinet decision, etc. For example, the U.S. Regulatory Impact Analysis Program
was introduced by presidential order, and the UK’s Public Service Agreement was introduced as a4

Cabinet policy. The evaluation systems in Japan are more firmly established in the national
regulatory process, because they are implemented by means of law.
2) Comprehensiveness and exclusivity:
All aspects of government activities are subject to ex-ante and ex-post evaluations, and to interim
evaluation when necessary. The system’s three types of evaluation are project evaluation,
performance measurement, and comprehensive evaluation of multi-ministerial policy. Theirevaluations include various approaches, such as use of quantitative standards, management models,accounting systems, and social scientific or organizational approaches. The U.S. has several systems
for evaluating government policies, programs, projects and services. These are based on different
laws, orders, guidelines, and so on, and are implemented by different bodies. Examples of such
systems are the above-mentioned Regulatory Impact Analysis established by presidential order,
program evaluation by the Government Accountability Office (GAO), and the national government
activity evaluation systems resulting from the Government Performance and Result Act (GPRA). In
Japan, all aspects of evaluating governmental activities are subject to the GPEA.
3) The combination of existing evaluation systems:
No new system or approach was created. The Japanese system has been made up from various
systems that have already been adopted elsewhere in the world.
4) Dual evaluation systems:
Evaluations may be conducted by the Ministry of Internal Affairs and Communication (MIC) for
national policies and programs in addition to each ministry. Each ministry evaluates its own polices
and programs. The MIC conducts comprehensive evaluation of multi-ministerial policies andprograms in order to maintain consistency among policies. In addition, the MIC re-evaluates oroversees each ministry’s “evaluation of polices, programs and other activities” in order to secure
overall objectivity and appropriateness of the systems for evaluating government policies andactivities.
5) Flexibility:
Each ministry designs its own policy evaluation system to meet its needs. Each ministry conducts
evaluations for the policies and programs, projects, etc. under its jurisdiction and publishes evaluation
records.

5. The System for Evaluating Policies, Programs and Projects of the MLIT
5.1 The system for evaluating policies13)
Upon the enactment of the GPEA (2001), the MLIT established basic guidelines for implementing
policy evaluations, under which both public works projects and other ministerial activities including
research and development would be subject to evaluation. The system aims to establish a policy
management cycle of “Plan – Do – See.” The cycle includes Policy Assessment (ex-ante evaluation),
Policy Check Up (interim evaluation) and Policy Review (ex-post evaluation) (Figure 3).

5

“Basic Plan for Policy Evaluation”“Implementation Plan for ex-post evaluation”

Plan

See

Policy Check Up(evaluation of policy
objectives)

Budget request

PolicyAssessment(evaluation of
new projects)

Policy Review(evaluation by topics)

Policy planning(ex-ante evaluation)(Ex-post evaluation)

Policy objectives
Livelihood, safety
environment,
vigor
Implementation of policies
and projects

Do
Figure 3. System for Evaluating Policies of the MLIT13)
5.2 System for evaluating projects
All public works projects, excluding maintenance and management of existing infrastructure anddisaster-restoration works, are subject to evaluation. Evaluations are conduced in the year before
their implementation approval and budgeting (ex-ante evaluation), when the project is subject to thedecision of continuation/termination (interim evaluation), and after completion of the project todetermine whether further improvement is necessary (ex-post evaluation). This process is shown in
Figure 4.

Project evaluation flow
10 years has passed since the inception

every 5 years after the
first interim evaluation

within 5 years after
project completion

5 years has passed since projectapproval and construction has not started
Project approval

Ex-anteevaluation

Construction

Interimevaluation

Figure 4.

Interimevaluation
evaluation

Completion

Interimevaluation

Ex-postevaluation

System for Evaluating Projects of the MLIT13)6

Ex-ante evaluation is comprehensively conducted based on evaluation items such as necessity,
efficiency and effectiveness. Consideration should be given to the environmental effects of the
project. Records and risks of disaster are checked and taken into account, when necessary.
An interim evaluation is conducted 1) when five years has passed since project approval andconstruction has not started, 2) when 10 years has passed since the inception of construction but
without its completion, 3) when five years has passed since project planning started without approval
for implementation, 4) every five or ten years after the first interim evaluation, or 5) when thenecessity for reassessment has resulted from drastic socioeconomic changes or technical innovations.
Ex-post evaluation should be conduced within five years after project completion.
Each of these evaluations is recorded on a form called the “evaluation chart” which serves as an
at-a-glance record of a project’s evaluation history. The evaluation chart also allows information to
be provided on project progress and for methods of evaluation to be studied. Together with theresults of cost-benefit analysis, the evaluation charts are open to the public on a website.

6. Cost-Benefit Analysis for MLIT projects
6.1 General
Cost-benefit analysis compares the total costs of a project to its total social benefits. Under the
GPEA (2001), the MLIT conducts cost-benefit analysis on every project, in principal, based on theTechnical Guidelines of Cost-Benefit Analysis for Public Works Projects (2004)14). Maintenance andmanagement of existing infrastructure and disaster-restoration works are excluded. In addition to thetechnical guidelines, detailed manuals are made for each type of public works.
Cost-benefit analysis was not conducted for most projects before the enactment of the GPEA. For
example, in the case of a road, the necessity and effectiveness of a road requested by locals werestudied qualitatively, the demand for such a road was assessed by traffic volume estimation, and thecosts of constructing, managing and maintaining the road were estimated for several scenarios ofroutes and construction methods, in order to determine the best route and construction method. In
this way, the costs were assessed, but the social benefit of the route was not estimated.
6.2 Factors for cost-benefit analysis
Cost-benefit items:
To estimate the benefit, the project effects should be listed and monetized as comprehensively as
possible by measuring changes in consumer surplus and by using the Contingent Valuation Method(CVM), the Travel Cost Method (TCM), or a hedonic approach. Table 1 gives the cost and benefit
items for each type of project of the MLIT.
Indicator:
Cost-benefit ratio (B/C) is mainly used. This is a ratio of total benefits to total costs. When theratio exceeds 1, the project is regarded as cost effective. The ratio applied as a precondition for
approval of project implementation depends on the project type. For example, a road project of the
MLIT must have a B/C of at least 1.5, but an agricultural road project of the Ministry of Agriculture,
Forestry and Fisheries needs a B/C of 1.0
Discount rate:
A fixed discount rate of 4% is adopted for all projects.

7Project
Type
River
Dam

Sabo dam
CoastalTable 1. Cost and Benefit Items for Each Type of Project (MLIT)15)
Cost-Benefit Analysis
Other Principal Eval.
Items
Cost items
Benefit items
construction, annual damage reduction, water quality
effects in the event of amaintenance, improvement, etc. (for environmental
disaster, records ofmanagement
improvement projects)
disaster, risk of disaster,river environment
construction
damage reduction, human life saving
effects in the event of adisaster, records ofconstruction, flood protection, erosion protection,
disaster, risk of disaster
maintenance, blown sand/splash prevention, coastalmanagement
construction,
maintenance,
management

environmental protection, coastal use
travel time reduction, travel cost
reduction, traffic accident reduction

construction,
management,
operation,
re-investment
construction,
landacquisition,
re-investment
construction,
maintenancefreight transport cost reduction, travel
cost reductionsocioeconomic
environment, logistics,
urban revitalization,living environment safety
negotiation w/ locals,
environmental impact

travel time reduction, cost reduction,
supplier benefit

regional development,
negotiation w/ locals

user benefit (travel time reduction, etc.),
supplier benefit

Air/searoutedelineation

set up,maintenance,
renewalsafety, transport benefit

Admin.
officebuilding

initialconstruction,
maintenance,etc.

land use benefit, user benefit, building
performance improvement,
environmental friendlinesstraffic congestion
mitigation, effects on
local economy
safety improvement,
conformity tointernational standards,
reliability improvement
urgency, appropriatenessof planRoad

Port andharbor

Airport

SubwayUnit value:
For the sake of consistency, attempts have been made to use uniform ways of setting unit prices andconducting B/C calculation. However, unit prices can greatly differ by project type even between
similar projects.
Salvage value:
It is the residual value of the project at the end of evaluation period, calculated as the expected net
benefit.
Sensitivity analysis:
It is made, if necessary, to incorporate future uncertainty into the cost-benefit analysis. Major factorsthat affect the cost-benefit calculation, such as demand, project cost and project duration, are varied tosee the how the result of the evaluation changes, and if the varied results are within an acceptable
range. The results are used in decision-making.

8

6.3 Cost-benefit analysis for ex-ante and interim evaluations
As mentioned above, the cost-benefit analysis is conducted for the ex-ante evaluation, and for interim
evaluation when necessary.
For ex-ante evaluation, the investment efficiency of the entire project is assessed. The social benefit
when the project is implemented versus that when it is not implemented are comparedFor interim
evaluation, a project is assessed in terms of the investment efficiency of the entire project, and theinvestment efficiency of the remaining portion of the project. Both assessments should be carried out.
The former assessment reviews the investment efficiency of the entire project at the time of interim
evaluation, to achieve accountability. The total costs and benefits when the project is implemented
versus those when it is not implemented are compared. The latter assessment provides information
on whether the project should be continued. “The investment efficiency of the remaining portion of
the project” is compared for the case that the project is completed and for the case that it is terminatedat the time of interim evaluation. The additional costs to complete the project and the estimatedbenefit increase between interim evaluation and project completion are compared regardless ofinvestments that have already been made or benefits achieved by the time of interim evaluation.
6.4 Results of cost-benefit analyses in FY200615)
For 353 of the 570 new projects of the MLIT, the results of cost-benefit analyses under ex-anteevaluation were made open to the public. For 828 of the 879 ongoing projects of the MLIT, theresults of cost-benefit analyses under interim evaluation were made open to the public, including theresults of cost-benefit analyses for 8 of the 18 projects that were terminated as a result of the interim
evaluation (Table 2).
Table 2. Results of Interim Evaluation of MLIT Projects for FY2006
All
Projects
Projects to be Projects
Projects
Projects
to beContinued w/ to beunderContinued
Modification Suspended EvaluationRiver
80 (79)79 (79)1Dam
11 (9)
7 (7)
2 (1)
1 (1)
1
Sabo
65 (65)65 (65)
Coastal66 (65)60 (60)
2 (2)
3 (3)
1
Road
207 (205) 200 (199)
5 (5)
2 (1)
Land readjustment
62 (61)59 (59)2 (2)1Urban redevelopment
10 (9)9 (9)1Port and harbor
142 (131) 129 (1)
2 (2)
8 (0)
3
Subway2 (2)2 (2)Public housing
12 (1)
11 (1)
1
Housing and urban
15 (15)15 (15)infrastructuredevelopment
Housing and urban
22 (2)
21 (2)
area development
Sewerage149 (148) 147 (147)1 (0)1Urban park
36 (35)36 (36)1 (1)Total
879 (828) 840 (810)
11 (10)18 (8)
10

Project Type

Parentheses indicate the number of projects subjected to cost-benefit analysis under interim evaluation.

97. Case studies: Termination of projects based on interim evaluation
Examples of projects terminated based on the interim evaluation in FY2006 include some dam
projects whose B/C’s exceeded 1. This was because the combination of channel improvement andretaining basin was considered more cost effective than dam.
Another example of a terminated project is a subway project in Kawasaki City (Kanagawa Prefecture),
near Tokyo. The 15.5-km Trans-Kawasaki Subway Project16) between Shinyurigaoka andMotosumiyoshi (10 stations) was approved in 2001, with a total investment of 522.6 billion yen.
However, Kawasaki City suspended construction in FY2003 as a result of demographic changes andfinancial constraints foreseen from financial reforms of the central government. The project was
subject to interim evaluation, because five years had passed since project approval and constriction
had not started.
Feasibility studies on demand estimation, cost estimation, cost-benefit analysis andrevenue-expenditure balance estimation were carried out under interim evaluation for three scenarios(Table 3).
- Scenario (a): The plan from the FY2001 approval, but with costs reduced because of decreases ininterest rates.
- Scenario (b): Reduced ridership based on new demographic projections, reduced construction costs
afforded by specification revisions, and increased revenues achieved by operational improvements.
- Scenario (c): A new route to a new population center.
Table 3. Feasibility Study for the Trans-Kawasaki Subway Project(Shinyurigaoka – Motosumiyoshi) Ex-Ante Evaluation vs. Interim Evaluation
Ex-anteInterim Eval. (FY 2006)
Eval.
Original
Original
Modified
New route
plan
(a)
(b)
(c)
Construction cost (bil. yen)
522.6
460.6
401.6
424,6
179
152
154
204
Estimated ridership (thou. person/day)
Revenue-expenditure balance
breakeven cum. loss
breakeven cum. cash needB/C (30 years)

26th year
28th year

never
never

80th year
68th year

22nd year
31st year

2.2

1.7

1.9

2.4

The B/C was estimated to be 2.2 under the feasibility study at FY2001 ex-ante evaluation. The 2006
feasibility study estimated a B/C of 1.7 for Scenario (a); however, the revenue-expenditure balance
estimation shows that the project would never break even. Even Scenario (b), with a B/C of 1.9,
would take more than 40 years to break even, which is the ministry-recommended maximum for soundoperation of a subway. Consequently, Kawasaki City terminated the subway project because there
was little likelihood of ever recouping the construction costs.
Kawasaki City will apply for approval in the near future of a project with a new route; however, thecity will closely scrutinize its financial situation, especially the amounts and timing of disbursementsfor other ongoing, large-scale projects, such as sewerage system improvements, in order to properly
time the project approval of the new subway route.
This case shows that the feasibility study conduced under the interim evaluation eventually led the city10

to choose a more cost-effective plan. The feasibility study under interim evaluation served to
improve the efficiency of the project.

8. Issues of Feasibility Studies under Japanese Systems for Evaluating Government
Policies
It is uncertain how feasibility studies, especially cost-benefit analyses, influence whether new projects
are approved. This is because only the data for initiated projects are made open to the public.
However, it seems that thorough examination has been carried out within the administration toward
rejecting inefficient projects, because the data on approved projects would have to be made open to the
public. Therefore together with the principal of accountability under the system of evaluating
policies and government activities, feasibility studies that include the cost-benefit analyses seem work
well. Nevertheless, concerns remain.
1) Issues associated with the fact that cost-benefit analysis is carried out by the project implementer(the local governments or the MLIT) and by the project subsidizer (the MLIT)15).
a) The estimations of costs and benefits may include biases to maintain the necessary B/C values.
b) Because environmental protection, disaster prevention and other such benefits are difficult tomonetize, they are excluded from the estimation of benefits. Instead, they are qualitatively described.
In such case, such benefits may be excessively stressed or ignored.
2) The items subject to estimation and the methods of cost and benefit estimations, as well as the unit
price of such items, differ greatly by the type of project. Even for similar project types, thecost-benefit analyses may be carried out using vastly different approaches. Consequently, thecost-benefit ratio cannot be compared from one type of project to the other. This is true even for
projects within the MLIT.
3) A new project is evaluated one year before submission for approval and budgeting. In the case ofa large-scale project, such as a long mountain road, the project is divided into phases, and approvaland budgeting are carried out successively for each phase. This means ex-ante evaluations and eveninterim evaluations are carried out for each phase. It is very difficult to judge efficiency andeffectiveness of a large project by looking at it in small phases.
4) In the case of a multi-government level project in which the central government and a prefectural
government have shares, such as a multi-purpose dam, the central government and prefectural
government evaluate respectively the project and there is no unified evaluation system so far.

9. Conclusions
Under systems for evaluating public policies and projects, every government activity in Japan issubject to evaluation. As part of the public policy management system, ministerial policies of the
MLIT are evaluated before policy implementation and after project completion, as well as during theimplementation, if necessary. The GPEA provides a legal framework for such evaluation systems;
thus, feasibility studies for most government projects are mandatory. The components, results, issues
and outcomes of Japanese feasibility studies for public projects are summarized as follow:
Components:
1) Cost-benefit analysis is conducted, in principal, for all projects.

B/C is used to judge the11effectiveness of each project. Project implementation and continuation require a B/C of at least 1.
The value required of the B/C may differ by the type of project.
2) Other analyses, such as demand estimation, revenue-expenditure balance estimation, andenvironmental assessment, are conducted as necessary.
Results:
1) Ex-ante evaluations served to prevent inefficient projects from being implemented, because of thepossibility of public scrutiny. Information and data, including B/C, for each project must be madepublic, because of the accountability achieved by the system for evaluating government policies.
2) Interim evaluation caused the modification or termination of projects that no longer possessed theirinitial necessity, effectiveness, efficiency or priority.
Issues:1) The body that implements the project (the government) is the body that conducts the feasibility
study.
- Estimations of costs and benefits may include intentional or unintentional biases toward results thatjustify a project.
- Some benefits excluded from the benefit estimation because of the difficulty of monetizing them are
qualitatively described. Such descriptions may overstate or understate the benefit.
2) Allowing each ministry to design its own system for evaluating government policies achieves
flexibility, but it results in different approaches to cost-benefit estimation. Consequently, the B/C’s ofdifferent types of project cannot be compared. Even within the MLIT, direct comparisons of B/C are
not possible for different types of project.
3) A large-scale project is divided into phases, and approval and budgeting are carried out successively
for each phase. It is very difficult to judge efficiency and effectiveness of a large project by looking
at it in small phases.
4) In a multi-government-level project, in which the central government and a prefectural government
have shares, each level of government separately evaluates the project. There is no unified
evaluation system so far.
Outcomes:
Feasibility studies are carried out not only for new projects but also for ongoing projects under interim
evaluation of the policy management system. This allows the modification or termination oflongstanding incomplete projects whose necessity has become uncertain because of socioeconomicchanges.
Systems for evaluating government policies in Japan started at the local level, from interim evaluation.
Reflecting such background, feasibility studies for project evaluation serve as a basis for modifying or
terminating inadequate projects. In this way, the system greatly contributes to improving theefficiency of public investment.

References
1) Hokkaido, “Project Assessment by Time,”
http://www.pref.hokkaido.lg.jp/sm/gkk/toki/tokiindex.htm (in Japanese)2) Ministry of Internal Affairs and Communications (MIC), The Government Policy Evaluations Act(GPEA), 2001, http://www.soumu.go.jp/hyouka/030406_23_eng.html

123) Hokkaido, “History of the System for Evaluating Government Policies,”
www.pref.hokkaido.lg.jp/NR/rdonlyres/BDFF3D68-47C9-4756-8A0A-208DCFB533EC/0/iga00030.p
df, (in Japanese)
4) Local Finance Council, “Opinions for Reforming the Local Tax and Fiscal Systems (26/05/04),”
2004, http://www.soumu.go.jp/singi/iken_040526_1.html, (in Japanese)5) Ministry of Finance, “Highlight of the Budget for FY2004,” Dec. 2003, p 1,
http://www.mofa.go.jp/policy/economy/japan/budget2004.pdf
6) MIC, “Decentralisation Promotion Plan,” 1998, http://www.soumu.go.jp/czaisei/keikaku.html
7) PHP Institute, Inc., “Project Suspension under the System for Specified Project Evaluation,” PHP
Policy Research Report, (Vol.6 No.68), 2003, (in Japanese)
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8) Jun Miyawaki, “Termination of the Trans-Hidaka Prefectural Road,” PHP Policy Research Report,(Vol.6 No.68), 2003, research.php.co.jp/seisaku/report/03-68paradigm.pdf, (in Japanese)
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