3. Relationship with the System of National Accounts 1
The basic plan concerning the maintenance of public statistics (as decided by the cabinet on March
13, 2009) requires social security benefit expenditures to be consistent with various statistics
compiled based on international standards. Upon the designation of the Financial Statistics of Social
Security as basic statistics grounded in the Statistics Act, it was decided to explain their relationshipwith the System of National Accounts (hereinafter SNA) to better accommodate its users.

3-1 Difference in Scope
The Financial Statistics of Social Security and SNA differ in scope when it comes to what they define
as “social security.” The Financial Statistics of Social Security complies data on social security
revenue and expenditure based on the standards prescribed by the OECD and ILO. In contrast, the
SNA, which compiles data on the economic activity of the entire country without duplication, does
not list items that are categorized and aggregated under other economic activities as social security.
Therefore, the figures differ between the two. In what follows, we will explain the situations in which
the differences manifest.
(1) Difference in the Definition and Usage of the Term “Social Security”
First, we will clarify the difference between the two based on their differing definitions of “social
security.” While the term “social security” is used in several tables in the SNA, it should be notedthat the scope is not necessarily the same as the “social security” used in the Financial Statistics
of Social Security. The Supporting Tables 9 “Transfers from General Government to Households(Social Security Transfers)” and 10 “Social Security Contributions” released annually by the
Cabinet Office are prepared for the purpose of describing transactions between households 2 andgeneral governments 3 . They use terms such as “social benefits 4 ,” “social security funds 5 ,”“unfunded employee social benefits 6 ,” “social assistance benefits 7 ,” and “social security
contributions” and, as stated in the footnotes, they have a definition for each. Therefore, the SNA
does not include items that do not match the definition of social security, even if they are includedin the Financial Statistics of Social Security as social security.
Meanwhile, the public contributions 8 listed in the sources of social security funds (see Table 11
on page 14) as the funding sources of the Financial Statistics of Social Security are not listed in
Supporting Table 10 “Social Security Contributions,” which is prepared for the purpose of
describing direct contributions by employees and employers, because they are regarded by the
SNA as transfers within general governments.
Furthermore, there are differences between the two in terms of handling refunds. In the Financial
Statistics of Social Security, refunds are not used for actual benefit payments and contributions.
They have not been accounted for, either, because to do so would require retroactively recording
the data. Meanwhile, the SNA lists these amounts as social security in order to describe the stateof a country’s economy in full and without duplication, as described above.
In what follows, we will explain these points in more detail.
(2) Difference in Expenditure Tabulation
Next, we will clarify the contrasting relationship in expenditure items and the difference in scope.
iAs shown in the upper half of Figure 1 in the Appendix, the total expenditure in the Financial
Statistics of Social Security and the total in Supporting Table 9 “Transfers from General
Government to Households (Social Security Transfers)” do not match in terms of expenditure.
This is the difference in the scope of the expenditure summary. Specifically, it is due to thedifferences in how systems like the welfare pension fund and former public corporation staff's
accident compensation are treated. The welfare pension fund and former public corporation staff’s
accident compensation can be regarded as parts of the social security system in the Financial
Statistics of Social Security; however, they are categorized as private industry activity under the
SNA. Therefore, these items are not included in Supporting Table 9, which was prepared for the
purpose of describing transactions between households and the general government, which are
not stated separately in other statistical tables in the SNA.

Appendix Figure 1: Comparison between the Financial Statistics of Social Security and the SNA[Compilation of the Financial Statistics ofSocial Security][Compilation of the System of National
Accounts (SNA)][Social security expenditure][Social benefits] (Supporting Table 9)(1) Benefits distributed to individuals(1) Social security benefits (social security
funds)(2) Facility maintenance expenses, etc.

(2) Unfunded employee social benefits(3) Social assistance benefits

Social expenditures based on theOECD standards include the above (1)and (2).
Social security benefit payments
based on the ILO standards areequivalent to the above (1).

*Items such as employee pension funds are listed
separately under the private industry sector.
*The parts of childcare services not covered bychildcare fees are listed separately under
sections such as the final consumption
expenditure of the general government andnon-profit organizations serving households.

[Social security funding sources][Social security contributions](Supporting Table 10)(1) Social insurance premium(contribution from employers and insured
individuals)

Insurance premium payment for the social
security fund(2) Taxes (national and local taxes)* Taxes for the social security fund are listed
separately as current transfers 9 under thegeneral government.

(3) Other income (asset income and others)

In addition, since the separately reported data marked with * in Figure 1 in the Appendix are all
included in the overall summary calculation and the breakdown has not been published, it is notpossible to extract the social security expenditures related to our system.
(3) Differences in Revenue Tabulation
Next is the contrasting relationship regarding revenue items and the difference in scope, control,and scope in revenue items. As shown in the lower half of Figure 1 in the Appendix, the total
amount from the funding sources in the Financial Statistics of Social Security and the total iniiSupporting Table 10 “Social Security Contributions” also do not match in terms of revenue.
This is mainly because the scope of Supporting Table 10 is limited to insurance premium
payments. As in Supporting Table 9, Supporting Table 10 lists only transactions between
households and the general government. Therefore, items such as public contributions, otherrevenues, and distributions from reserve funds, which are recorded together with insurance
premium payments in the Financial Statistics of Social Security, are not included in Supporting
Table 10. In other words, there is a large gap between the gross amount of funding sources in the
Financial Statistics of Social Security and Supporting Table 10 because public contributions madeto various systems, including the basic pension, are not listed in Supporting Table 10 under the
SNA. As mentioned above, public contributions are recorded in Supporting Table 6 instead ofSupporting Table 10 as current transfers from the central government and local governments tothe social security funds, since the SNA accounts for all economic activities of Japan in full. To
reiterate, since Supporting Table 10 only lists transactions between households and the general
government, just as Supporting Table 9 does, there is also a difference in the institutional scopein the sense that the welfare pension fund and the former public corporation staff's accident
compensation, which are categorized as private industry activities under the SNA, are not listed
in Supporting Table 10.
Also, there are differences in the accounting methods used. For example, with regard to long-termcare insurance, only the contributions made by the primary insured persons (aged 65 and over)are included in the contributions by the insured in the Financial Statistics of Social Security;contributions made by the secondary insured persons (aged 64 to 70) are treated as contributions
to each individual’s applicable health insurance system. In contrast, the SNA includes all of thecontributions made by individuals in each system applicable to long-term care insurance ascontributions made by the insured persons under long-term care insurance. Therefore, the amountlisted would differ even for “contributions by the insured under long-term care insurance,” which
seems at a glance to be the same for both. Needless to say, the SNA excludes the long-term careportion of the social contribution to each health insurance system because it aggregates the dataso as to avoid duplications. As for the results of the re-tabulation of contributions by secondary
insured persons into contributions by the insured and contributions by the employers in the
Financial Statistics of Social Security, please refer to Table 16 on the website.

Appendix Figure 2: Appropriation of the Social Insurance Contributions forLong-Term Care Insurance
Covered as“long-term careinsurance”in the Financial
Statistics of Social Security

Primary insured

Listed under each health careinsurance type in the Financial
Statistics of Social Security

Secondary insured

Covered as “long-term careinsurance” in the SNA

iii

3-2 Difference between the Financial Statistics of Social Security and the SNA’s “Other Reasons”
There are various other differences than those related to scope, as mentioned above. For example,
some parts of the SNA include estimated figures.
The SNA is published after the first, second, and third annual estimates are conducted. In other words,
since some financial statements and annual reports are still unavailable at the publishing stage of thefirst annual estimate, they incorporate figures that are estimated based on past data and correct themat the revision stage to prepare for the second annual estimate. Institutional data such as national
health insurance, old age health care, and long-term care insurance fall under this. Then, they adjust
the figures in the second annual estimate, such as the estimates created via the commodity flow
method, which estimates the flow of goods and services, and the estimates created via the valueadded method, which estimates added values using economic activity, and publishes them as thethird annual estimate. Therefore, differences arise due to reasons other than the scope of theaggregation of the most recent data.
In addition, whereas the Financial Statistics of Social Security is compiled basically by summing
financial statement data, the SNA performs necessary estimations and corrections based on theinternational standards prescribed by the United Nations. In other words, it should be noted that thedifferences in figures between the two are also caused by technical and practical differences incalculation method.

3-3 Complying with the 2008 SNA
The 2008 SNA is the new System of National Accounts standards agreed to at the United Nations in2009. In the past, Japan had used the 1993 SNA. However, since Article 6 of the Statistics Act
stipulates that the system of national accounts comply with the international standards prescribed by
the United Nations, they began estimating based on the 2008 SNA in the FY 2015 Annual Estimateof the SNA and also decided to retroactively revise the coefficients from 1994 and after. Other
countries are also complying with the 2008 SNA; the United States and most of the EU countries did
so by 2013 and 2014, respectively. Japan ended up following suit and had responded to the 2008
SNA at the time the FY 2011 standard revision was conducted.
The main revised contents of the 2008 SNA include the introduction of intellectual property products(R&D investment reporting), investment reporting for weapons systems, diversification of financial
assets, and so on. We can say that these are intended to accommodate changes in the economic andfinancial environment since the 1990s.
When it comes to the Financial Statistics of Social Security, it is not so different from the 1993 SNA.
However, since there were some changes, such as changes to names and categories, we willsummarize them.
(1) Social Benefits Other than Social Transfers in Kind
Regarding social benefits other than social transfers in kind, the categories “social benefits fundedby pensions” and “unfunded employee social benefits” were reclassified into “other social
benefits funded by insurance and pensions” and “other unfunded social benefits,” respectively,
and some social assistance benefits are now treated as social transfers in kind.

iv

“Other social benefits funded by insurance and pensions” refers to benefits paid in cash by postretirement income security systems based on employment relationships, which come under social
insurance systems other than the social security systems operated by general governments. As for“other unfunded social benefits,” it refers to welfare benefits paid to employees by employers
with their sources without using external institutions such as social security funds (general
governments) and pension funds (financial institutions) or establishing one’s own fund, and theemployer is obligated to pay even if there is no specific fund. As a note, prior to the 1993 SNA,
benefits from corporate pensions were recorded under “social benefits by pension funds,” and theentire amount of lump-sum retirement payments was recorded under “other unfunded employeesocial benefits.” However, starting with the 2008 SNA, the amount of benefits paid from pension
funds and the vested part of the lump-sum retirement payment to be recorded on an accrual basis
have been recorded under “other social benefits funded by social insurance and pensions.” Inother words, retirement benefits included in “other social benefits funded by insurance andpensions” are now limited to the ones recorded on an accrual basis. Meanwhile, lump-sum
retirement payments recorded on a cash basis and contributions to private insurance are recorded
under “other unfunded social benefits.”
Furthermore, medical benefits paid via public contribution, which used to be included in “social
assistance benefits” under “social benefits other than social transfers in kind,” have been classified
as “social transfers in kind (purchased market production)” since the 2008 SNA. These aresummarized in the figure below. In addition, some social assistance benefits—specifically
medical benefits paid for through public contributions 10—are now treated as “social transfers inkind.”

Appendix Figure 3: Changes in Social Benefits in Social Transfers in Kind
FY 2011 Standards (2008 SNA)FY 2005 Standards (1993 SNA)

Social benefits other than social transfers in
kindSocial benefits other than social transfers in
kindSocial security benefits in cash
Other social benefits funded byinsurance and pensions
Other unfunded social benefits

Social security benefits in cash
(1)
(2)

Social assistance benefits

Social transfers in kin

Social benefits funded by pensions
Unfunded social benefits for employees
Social assistance benefits(3)(1) Lump-sum retirement payment (subject to accounting standards) recorded on an accrual basis(2) Lump-sum retirement payment (subject to accounting standards) not recorded on an accrual basis(3) Medical benefits covered by public expenditure
Source: Excerpt from Figure 14 of “2008 SNA ni taiō shita wagakuni kokumin keizai keisan ni tsuite (Heisei 23-nen kijunban) (The 2008 SNA-Complied National Accounts of Japan (FY 2011 standard edition)” by the National Accounts
Division, Economic and Social Research Institute, Cabinet Office, Government of Japan (2016).

v

(2) Social Transfers in Kind (Purchased Market Production)“Social transfers in kind (purchased market production)” refers to goods and services purchasedby general governments to supply benefits in kind to households. They include (1) medical andlong-term care expenses covered by medical and long-term care insurance under social security
systems, (2) medical care benefits covered by public expenditure, and (3) government expenses
such as purchasing textbooks for compulsory education and providing free public transportation
for wounded soldiers. Under the 1993 SNA, these were included in (1) “social benefits in kind”
under “social transfers in kind,” (2) “social assistance benefits” under “social benefits other thansocial transfers in kind,” and (3) “transfers of individual non-market goods and services” under“social transfers in kind.” These are summarized in Figure 4.

Appendix Figure 4: Changes in Social Transfers in Kind

FY 2011 Standards (2008 SNA)FY 2005 Standards (1993 SNA)

Social transfers in kindSocial transfers in kindSocial transfers in kind(purchased market production)

Social transfers in kind(1)Social transfers in kind (nonmarket production)

Transfers of individual nonmarket good and services(2)Social benefits other than socialtransfers in kindSocial assistance benefits(1) Expenses such as purchasing textbooks and providing free public transportation for wounded soldiers(2) Medical care benefits covered by public expenditure
Source: Excerpt from Figure 17 of “2008 SNA ni taiō shita wagakuni kokumin keizai keisan ni tsuite (Heisei 23-nen kijunban) (The 2008 SNA-Complied National Accounts of Japan (FY 2011 standard edition)” by the National Accounts
Division, Economic and Social Research Institute, Cabinet Office, Government of Japan (2016).

Other than these, the impact of the 2008 SNA revision on the social security field includes thefacts that the idea of an accrual basis became effective in recoding vested corporate pensions; theclassification of “accounting of mutual aids by the Promotion and Mutual Aid Corporation forPrivate Schools of Japan” was changed from “public non-financial corporation” to “social
security fund”; “accounting of retirement pensions of the mutual aid association for national
public officials, the federation of mutual aid association for national public officials, the mutualviaid association for local public officials, and the federation of mutual aid associations for local
public officials” were classified as private financial institutions; and the items listed under“employers’ actual social contributions” and “(employers’) attributable social contributions”
were changed. 11

References
National Accounts Division, Economic and Social Research Institute, Cabinet Office, Governmentof Japan (2016). “Kokumin keizai keisan no heisei 23-nen kijun kaitei ni mukete (In preparation
for the FY 2011 revision to the SNA standards).”
National Accounts Division, Economic and Social Research Institute, Cabinet Office, Governmentof Japan (2016). “2008 SNA ni taiō shita wagakuni kokumin keizai keisan ni tsuite (Heisei 23-nen
kijun-ban) (The 2008 SNA-Complied National Accounts of Japan (FY 2011 standard edition).”National Accounts Division, Economic and Social Research Institute, Cabinet Office, Governmentof Japan (2016). “Heisei 27-nendo kokumin keizai keisan nenji suikei (Heisei 23-nen kijun kaiteichi) ni kakaru riyō-jō no chūi ni tsuite (FY 2011 annual estimate of national accounts (Revised FY
2011 standard value)).”Nakao, Takahiro (2017). “Wagakuni SNA ni okeru kakutei kyūfu-gata kigyō nenkin no kiroku hōhōno henkō ni tsuite (Changes in the recording method of defined benefit-type of corporate pension
under Japan’s SNA).” National Economic Accounts Quarterly. FY 2012 No. 2.
Social security expenditure and related statistics are made available as needed and the results areaccumulated as social security research documents on the National Institute of Population andSocial Security Research website.
http://www.ipss.go.jp/site-ad/index_japanese/security.html

1

As basic statistics grounded in the Statistics Act, the System of National Accounts (SNA) is prepared based on the

preparation standards and methods of the SNA while complying with the international standards prescribed by the United
Nations, aiming to systematically record the overall picture of Japan’s economy in an internationally comparable way.
(http://www.esri.cao.go.jp/jp/sna/menu.html)
2“Households” includes all small groups of people sharing family finances who are residents of Japan.

3“General governments” includes the central government and local governments as well as the social security funds

established and managed by them.
4“Social benefits” is defined as current transfers that are paid to households to be used for preparing for the needs that arise

from certain events or situations such as sickness, unemployment, retirement, housing, education, and a family’s economic
circumstances. They include (1) “social security benefits paid in cash” by social security systems such as the public pension,(2) “other social insurance and pension benefits” including corporate pensions and lump-sum payments recorded on an
accrual basis, (3) “unfunded employee social benefits” such as lump-sum payments not recorded on an accrual basis, (4)“social assistance benefits” such as welfare, and (5) under “social transfers in kind,” medical insurance benefits and longterm care insurance benefits under social security systems.
5“Social security funds” is one of the sub-divisions under “general governments,” just like “central government” and “local

governments” are, and they are defined as something that meets all criteria including (1) imposed and controlled by thegovernment, (2) covers the whole or most of society, and (3) participation and contribution are mandatory. Specifically,
they include medical care and long-term care businesses, a part of the mutual aid associations that operate the pension forvii

public officials, and a part of the independent administrative agency (the Government Pension Investment Fund) of the
public utility account under local public organization, in addition to the country’s special accounts (special accounts forhealth insurance business), which operate the mutual aid pensions for public officials. As a note, due to the consolidationof pensions for employees, the welfare pension account and transitional long-term accounts under “long-term accounts”
have been treated as social security funds, while accounts such as retirement pensions have been positioned as pension
funds or private financial institutions since October 2015. “Long-term accounts” as a whole used to be treated as social
security funds prior to October 2015.
6“Unfunded employee social benefits” refers to welfare benefits paid by employers from their sources to employees

without using external institutions such as social security funds (general governments) and pension funds (financial
institutions) or establishing their own funds. They are positioned as something that employers are obligated to pay even if
there is no special fund.
7

While “social assistance benefits” are intended to address the same needs as social insurance benefits, they are not paid

under a social insurance system that requires one to make social contributions to participate; they refer to current transfers
paid to households by general governments or non-profit organizations servicing households.
8“Public contributions” refers to state contributions and other public contributions.

9“Current transfers” under general governments refers to current transfers between internal divisions of a general

government. As a note, transactions such as transfers of funds to be used for the recipient side of gross fixed capitalformation are treated as capital transfer. (The above notes were all created by quoting the applicable parts of the term
descriptions in the Annual Report on National Accounts published by the Cabinet Office.)
10

This refers to medical expenses covered by the government based on laws such as the Public Assistance Act and theServices and Supports for Persons with Disabilities Act.
11

Nakao (2017) explains in detail the changes in the vesting in corporate pensions, “employers’ actual social contributions”

and “(employers’) attributable social contributions.”viii