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PROSPERITY IN DEPTH: JAPANLand of the Setting Sun?

By Robert Dekle

THE 2012 LEGATUM PROSPERITYINDEX™ RANKING:

22/142

GLOBAL TRANSITIONSPROSPERITY STUDIESTHE LEGATUM INSTITUTE
Based in London, the Legatum Institute (LI) is an independent nonpartisan public policy organisation whose research, publications, andprogrammes advance ideas and policies in support of free and prosperous
societies around the world.
LI’s signature annual publication is the Legatum Prosperity Index™, aunique global assessment of national prosperity based on both wealthand wellbeing. LI is the co-publisher of Democracy Lab, a journalistic
joint-venture with Foreign Policy Magazine dedicated to covering politicaland economic transitions around the world.

PROSPERITY IN DEPTH
To complement the Prosperity Index, we commissioned 12 specialists—
economists, political scientists, journalists—to provide additional
analysis of selected countries. Their studies vary from essays putting
contemporary challenges into historical context (Iran, China, Mongolia)
to up-to-the-minute surveys of the barriers to economic growth (Egypt,
Japan, India) to controversial alternatives to the conventional policy
interpretations (Iceland, Colombia, Vietnam). In each case they represent
highly original work by distinguished experts that adds depth and insightto the statistical analysis of the Prosperity Index.

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THE LEGATUM INSTITUTE

FOREWORD

Remember ‘Japan Inc’? Half-real, half-bogeyman in the 1980s, the idea that theJapanese had managed to organize their economy well enough to cut throughAmerican and European competitors like a samurai sword through sashimi
now seems risible. But the Japanese aren’t laughing. The economy did, indeed,
downshift in the 1990s and never recovered global technological leadership or
rapid growth. But it is more than productive enough to provide a very high living
standard for almost all its citizens. Not surprisingly, Japan ranked a superior 22nd(out of 142 countries) on this year’s Prosperity Index, with outstanding scores inevery category but civil liberties.
That’s not the end of the story, though. Thanks in large part to rapid aging
and falling savings rates, Japan will not be able to sustain the current qualityof life unless it moves out of a well-worn rut. Put it another way: Japan is going tohave to change in order to stay the same.
Robert Dekle, a professor of economics at the University of Southern California
and former specialist on east Asia at the International Monetary Fund, outlines theformidable obstacles to this needed reform, ranging from the political veto powerof rural constituencies, to disdain for immigrants to the tangle of government
bureaucracies that never relinquish turf without a fight. But Dekle is cautiously
optimistic. The Japanese adjust when they must, he suggests—and the catalyst thistime around may be fear their country is being marginalized by China.
Peter Passell, Editor

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ABOUT THE AUTHOR
Robert Dekle is a professor of economics at the Universityof Southern California and a former specialist on east Asia at
the International Monetary Fund.

ABOUT THE EDITORPeter Passell is a senior fellow at the Milken Institute andthe editor of its quarterly economic policy journal, The
Milken Institute Review. He is a former member of the New
York Times editorial board and was an assistant professor atColumbia University’s Graduate Department of Economics.
Passell is the economics editor of the Democracy Lab channel
at ForeignPolicy.com, a joint venture between the Legatum
Institute and Foreign Policy magazine offering analysis andopinion on the issues facing countries in transition from
authoritarianism to democracy.

2

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THE LEGATUM INSTITUTE

JAPAN:

Land of the Setting Sun?
Japan faces problems
that must be solved,
simply to sustain
the current standardof living.

J

apan is gradually approaching an economic dead end—albeit a very
comfortable one, for the time being. Admired (and feared) in the
1970s and 1980s for its well-oiled, seemingly unstoppable growthmachine, Japan now putters along in the shadows of a huge, rapidly
growing China and a vibrant, innovative South Korea.
Nonetheless, material living standards are still the highest of any large
country in Asia. And the reforms needed to revitalize the economy
would threaten a social equilibrium in which few Japanese are denied‘the good life’. But the alternative to growth isn’t a golden sunset.
Japan faces problems—some immediate, some long-term—that must
be solved, simply to sustain the current standard of living.

ECONOMIC SLACK AND THE FISCAL STALEMATE
Whatever its long-term prospects, for the moment there is considerable
slack in the Japanese economy—and thus an opportunity to growwithout structural reform. The source of the immediate problem,of course, was the great March 2011 earthquake and tsunami thatkilled some 20,000 people and generated hundreds of billions of dollars
worth of physical damage and forever-lost output.
That disaster created bottlenecks in Japan’s ‘just-in-time’ industrial
system, along with severe energy shortages in the wake of shutting down
nuclear reactors. As a result, Japan’s GDP plunged at an annualized 8%
rate in the first half of 2011. And while the economy bounced back in thesecond half, GDP was still down (by 1.2%) for the year.
Quarterly indicators have since been highly volatile, but there’s noquestion that the economy is underperforming as a result of theunused productive capacity left by the 2011 tragedy. And, in light ofthis degree of slack, the Japanese economy should be able to growconsiderably faster than its long-term trend—two to three percent
annually for the next two to three years seems about right.
On first glance, fiscal stimulus (more government spending or
temporary tax cuts) seems the most direct route back to fulleconomic capacity. But Japan’s fiscal position limits its room formanoeuvre. Some stimulus is already in the pipeline, with thewww.prosperity.com

3

BAMBOO GROVE IN ARASHIYAMA

government pledging to spend about $1.5 trillion in reconstructing the earthquakeravaged TŌhoku region over the next 25 years (an average of $60 billion per year). The
outlays will be front-loaded, moreover, giving the economy a bit more of a boost whenit’s most needed. However, hardly anyone believes this will be sufficient to close thegap between productive capacity and output.
Why not spend more, then? Japan is hamstrung because the government’s debt is alreadymore than double the current GDP—the highest by far among advanced industrializedcountries. Indeed, the ratio of public debt to GDP will continue increasing, even in theabsence of more fiscal stimulus, because government expenditure exceeds tax revenue by
close to 5% of GDP.
The primary reason that the deficit is ballooning is the sharp increase in social spending
over the last decade, owing to the rapid aging of the Japanese population. Social
welfare expenditures grew from 20% of all government outlays in 2000 to 30%
in 2012. Moreover, the aging continues apace. Unless policies change, the portion of
the budget devoted to old-age benefits is expected to increase rapidly in the next few
decades—far more rapidly than economic growth or tax revenue.

4

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THE LEGATUM INSTITUTE

It would have been easy, nonetheless, to make a case for fiscal
stimulus in the short-term if the Japanese were still saving a huge
portion of their private income. But the savings rate has beenfalling steadily as increasingly elderly households dip into theirnest eggs. And while Japan as a whole (public and private) stillconsumes less than it earns, the large public debt, the downward
trend in net savings, and the chronic budget deficit all makefurther fiscal stimulus a very hard sell to both financial markets
and politicians.
That leaves monetary policy to shoulder the burden of stimulating
the economy. The Bank of Japan (the central bank) has been
criticized for years for maintaining a relatively tight monetary
policy despite the weak economy—a policy that has, at times, fed
deflation. But today, with interest rates near zero, there’s no way
to cut nominal interest rates any further.

There is consensus
among Japanese
economists that thecountry should target
a large fiscal surplus
as soon as possible.

The Bank of Japan could still engage in ‘quantitative easing’, thepurchase of assets from households and businesses. However, the
US Federal Reserve’s experience with quantitative easing as a meansof increasing private spending makes it far from clear whether Japan
would get much bang for a yen. This uncertainty, combined with thebank’s deep conservatism, explains its reluctance to follow the US’slead. Probably the most one can expect from ongoing monetaryeasing is a weaker yen, which is currently at a record-high. This
would stimulate demand for Japanese goods in foreign markets.

THE DEBT ALBATROSSGiven Japan’s existing debt levels, just to keep the current
debt-to-GDP ratio constant, the government would need torun a fiscal surplus of at least 10% of GDP a year. The longer thegovernment delays, the larger the government debt and interest
payments. Thus, in spite of Japan’s unused productive capacity,
there is consensus among Japanese economists that the country
should target a large fiscal surplus as soon as possible.
Japan isn’t Greece. Most of Japan’s public debt is held by Japanesehouseholds and corporations, so paying interest on the debt
means paying themselves. The immediate danger here is that,
until Japanese public debt issuance is brought under control,
there is a risk that the bond market’s conviction that Japan iscreditworthy could be damaged, raising Japanese bond yields
from the current 1.6% (on a 20-year security) and making interest
payments on the public debt unsustainable.
There is no consensus among politicians, though, on how tomove the budget into the black. Tax increases are as unpopularin Japan as elsewhere. In late June 2012, after much legislative
wrangling, the lower house of Japan’s parliament musteredwww.prosperity.com

5enough votes to pass measures that would increase consumption
taxes from the current 5% to 8% in 2014, and 10% in 2015. But
these tax increases are conditional on an improving economy.
If growth in nominal GDP is below 3% in 2014, they willautomatically be postponed.
While crucial, this round of levies represents only the first stepin closing the fiscal gap. Japanese consumption taxes need to be
increased to 20% or more, and social security expenditures need
to be cut by raising the age of eligibility to age 68 (or higher)
within a decade in order to run the necessary fiscal surpluses.
More easily said than done—indeed, it is questionable whether
Japanese politicians can gather the political will to raise taxes
again, or to cut social security in the face of increased electoralpressure to cater to the elderly. The electoral calculation is evenmore daunting than an analysis of whose ox would be gored mightsuggest at first glance. While roughly half of those under the ageof 30 vote, over 85% of those over 65 vote, and the proportionof the elderly among voters is rapidly increasing. Moreover,Japanese electoral districts are unbalanced: a rural vote typicallycarries nearly three times the weight of an urban vote, with adisproportionate percentage of the elderly living in rural districts.

HOW TO INCREASE GDP GROWTH
It’s a matter of arithmetic that the only practical way to ease
the grip of the debt vise is to increase Japan’s rate of economic
growth. Other things equal, the ratio of debt to GDP will decline
as GDP rises, and annual deficits will become smaller as tax
revenue is pushed up by rising incomes. However, mainstream
projections of Japanese GDP growth over the next couple ofdecades hover around 1%—far too little to solve the problem
under plausible scenarios.
Reverse the Decline in the Labour Force
The main reason Japan’s GDP is not expected to grow much isdemographic. To create a population equilibrium in which births
roughly equal deaths, the total fertility rate—the number ofchildren born to the average woman—must be around 2.1. But
in Japan, the total fertility rate is just 1.39 (which is higher thanin South Korea and much of Eastern Europe, but a lot lower
than the US). As a result, Japan has one of the fastest aging
populations in the world.
In 2011, 23% of all Japanese were above the age of 65, comparedwith 13% of US residents. Barring the unforeseen, in 2020 some
30% of the population will be older than 65. And since theelderly retire (or work fewer hours), the total supply of labour is6

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It’s a matter ofarithmetic that the
only practical way
to ease the grip ofthe debt vise is toincrease Japan’s rateof economic growth.

THE LEGATUM INSTITUTE

Tupungato / Shutterstock.com

OSU KANNON COVERED SHOPPING STREET, NAGOYA

falling rapidly: From 1995 to 2010, the total number of workers in the workforce
declined by 3%, while hours worked fell by 12%.
Now (again, a matter of arithmetic), in the long-run, the growth in GDP is equal to thesum of the growth rate of labour productivity and the growth (or fall) in hours worked.
The fall in labour input has been responsible for reducing Japanese GDP growth by
an average of 0.8% annually since 1995. To put it another way, had Japanese labourgrown at 1% annually (about the same rate as in the US) instead of declining, annual
GDP growth in Japan would have averaged 2.5%, instead of 0.7%.
The Japanese have been reluctant to increase the size of the labour force by increasing
immigration or by making it easier for women to work. And they’re not (yet) suffering
materially for that reluctance because, for the last decade, Japan’s living standards(as measured by per capita purchasing power) have actually grown at about 1.1%
annually—a rate virtually identical to that of the US. (The numbers work because total
output is divided by a decreasing number of people.)

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J. Henning Buchholz / Shutterstock.com

A POLICEMAN GIVES DIRECTIONS, CENTRAL TOKYO

However, it is questionable how much longer the Japanese will
be able to resist reforms without paying a price. In the longrun, the rate of change in per capita income is equal to therate of change in labour productivity adjusted for the rate ofparticipation in the labour force. So, with an aging population
reducing labour-force participation (and hours per worker), there
will be relentless downward pressure on per capita income unlessthe labour force is augmented and/or the productivity of existinglabour increases.
Actually, the wheels within the demographic wheels makethis process even more problematic. As noted above, therising proportion of elderly among the adult population will
presumably make it more difficult to muster the votes to cut
government spending targeted to retirees. But most of thebenefits demanded by the elderly are labour-intensive services—nursing-home and hospital care, help with transportation,home care and the like. And, in a policy-as-usual scenario with a8www.li.com

With an aging
population reducing
the labour-force there
will be relentless
downward pressure
on per capita
income unless theit is augmented orexisting productivity
increased.

THE LEGATUM INSTITUTE

shrinking labour force, the budgetary cost of inducing workers totoil in the service of the elderly will rise. Note, too, that the very
low fertility rate that has aged the population so rapidly alsomeans there will be relatively few children and grandchildren to
fill in as caregivers.
What would it take to reverse the pressure on incomes from thedemographic shift? Start with immigration. Japan’s immigration
rate has increased a bit in recent years, but remains minisculecompared to other wealthy countries facing the reality of aging
populations. Annual immigration is just two per 10,000 residents,
compared to 36 in the US, 56 in Canada, 47 in Italy, and 26 in
the UK. Of the total population, 1.7% of people in Japan are
immigrants, compared to 13.5% in the US, 13.1% percent inGermany, and 21.3% percent in Canada.

Japan’s immigration
rate has increaseda bit in recent years,
but remains minisculecompared to other
wealthy countries
facing the reality of
aging populations.

The UN estimates that to keep the population constant, Japan
would need 400,000 immigrants a year—more than four times
the current rate—from now until 2040. If immigration were, infact, that high, immigrants and their offspring would constituteabout 20% of the total population of Japan in 2030. While that
may seem large, it is smaller than the proportion of foreign-bornin Canada today.
The lack of migration into Japan reflects attitudes toward ethnic
diversity. The only immigrant workers granted permanent
residence are those of Japanese ancestry within three generations.
Other foreign workers (there are some) must eventually go home.
Japan need not make the stark choice between a more liberalimmigration policy and cultural continuity, at least in the short-term.
It might minimize the culture shock and maximize the productivity
boost by requiring immigrants seeking permanent residence to be
proficient in Japanese and to bring either wealth or skills in demand
to the table. That’s how Canada (among other countries) does it—andwith considerable success in economic terms.
Regulatory Reform
There are other changes that would augment labour productivity—
none of them, alas, painless. In contrast to immensely productive
Japanese manufacturing, other sectors (notably services andagriculture) rank low in comparison with their counterparts inother rich countries. Agriculture produces very little of JapaneseGDP; hence the gains for the economy as a whole from agriculturalreform, while symbolically and politically important, would bemodest. But the service sector employs over 70% of all workers.
Thus, raising productivity in services is essential in raising overall
Japanese productivity.

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9One part of the problem is the difficulty of starting a new business,
especially when existing firms would suffer from the competition.
The World Bank’s Ease of Doing Business Index ranks Japan 107thout of 183 in the New Business category, behind the likes ofVietnam and Pakistan, and just ahead of Russia.
It is especially difficult to register land and to build structures.
There is no ‘one-stop shop’ to obtain permits. Instead, apetitioner must go through separate procedures at the ward
office, the legal affairs bureau of the Ministry of Justice, theDistrict Tax Office, the local tax office, the Labour Standards
Inspection Office, the Social Insurance Office, and the Public
Employment Security Office.
Or consider childcare services. High quality, affordable childcare
is key to solving Japan’s demographic woes because lack ofaccess to care both discourages working women from having
children and inhibits those who do from joining or returning to
the paid labour force. Yet Japan faces a shortage of childcare
facilities, in large part because of regulations that undermine
productivity and industry growth.
No one disputes the government’s role in assuring the healthand safety of children in care, but the regulations constrain theavailability of childcare facilities as well. For example, a numberof companies running nursing care chains for the sick and elderly
would like to create daycare centres on the same premises, both toutilize personnel more efficiently and to attract workers with smallchildren. But under government rules, no operator of a child careservice business is eligible for subsidies on more than one site.
Consider, too, that while there is a shortage of daycare facilities
for very young children, there is surplus capacity in kindergartens.
Proposals have been floated to integrate kindergartens andnurseries, and to allow the entry of organizations to provide bothkindergarten and nursery services on their premises. But these
proposals have gone nowhere, in part because existing nurseries
don’t want the competition, in part because of a bureaucratic‘turf’ war. It seems that the Ministry of Welfare, which regulates
nurseries, has opposed the encroachment of the Ministry of
Education, which regulates kindergartens.
Freer International Trade
Recent research has shown that Japanese firms competing in
global markets are more productive because the competition
forces them to stay current in technology and management.
And it almost goes without saying that reducing trade barriers
gives consumers a boost by increasing competition. Yet, Japan’s
negotiations to join the Trans-Pacific Partnership (TPP), (afree-trade area that includes the US and will eventually include

10

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The World Bank’s
Ease of Doing
Business Index ranks
Japan 107th outof 183 in the New
Business category,behind the likes
of Vietnam andPakistan, and justahead of Russia.

THE LEGATUM INSTITUTE

China, South Korea, and Canada) have stalled, owing to strong
opposition from Japan’s small but fierce agricultural lobby.
The level of protection for Japanese agriculture is very high. In
fact, the total subsidies are as high as the total value added by
the agricultural sector, implying that the industry is entirely
a creature of government intervention in the service of aging
farmers. But because of non-proportional representation in
Japanese elections (discussed above), these farmers carryinordinate political weight. So there is a real risk that the tail will
wag the dog in trade negotiations—that the TPP will be stymied
by an industry that adds almost nothing to Japan’s GDP.

UNRAVELLING THE GORDIAN KNOT
During the administration of Junichiro Koizumi (2001–06),
the government proposed to remove the power of incumbent
businesses and the bureaucrats who nurture them in orderto promote entry and competition. And despite determined
opposition, Koizumi did succeed in introducing some measuresthat raised market efficiency, including giving employers more
flexibility in hiring and firing, and promoting competition in
financial services. Still, Koizumi’s reach far exceeded his grasp;
he was out of office before he got much done and since his exit,
regulatory reforms have been rolled back.

Recent research has
shown that Japanesefirms are moreproductive whencompeting in global
markets because thecompetition forcesthem to stay current
in technology andmanagement.

Incumbent businesses have returned to conspiring against entry
into their markets. Large firms again appear to be maximizing thewelfare of core employees, especially of top managers, rather
than the interests of the stockholders. By the same token, ‘soft
corruption’ is still very much alive in the government: ministries
bitterly resist changes that would reduce extra-legal perks forsenior bureaucrats, such as near certainty that they will be able
to obtain jobs in the industries they regulate once they retire.
It is understandable that vested interests are fighting deregulation.
The puzzle is why the Japanese people have been so complacent
about regulations that raise prices and deny them many of theconveniences common in affluent countries.
A puzzle, but one that’s fairly easily solved: the Japanese are
more or less happy with the material aspects of their lives.
(According to Prosperity Index figures, 74 percent express
satisfaction with their living standard.) And why not? Averageliving standards have never been higher—and are still rising.
During the Koizumi administration, Japan experienced a bit ofWestern-style capitalism, with its menu of “creative destruction”
and drive for efficiency at the expense of employment stability.
It is fair to say that while the Koizumi reforms did increase GDP

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11growth, the increase did not fully compensate, in the minds of the Japanese, forhigher job volatility and a (slight) rise in inequality. Thus, most Japanese today
would probably oppose sweeping market-oriented reforms that, say, raised thepace of GDP by as much as half a percentage point annually, if they came at
the expense of greater uncertainty about employment and/or the demise of
unproductive, but familiar, businesses.
As Milton Friedman sagely observed, it generally takes a crisis to produce realchange in economic governance. Japan is no exception. In Japanese history, thebig shake-ups occurred with the arrival of a threat from the West in the form ofCommodore Perry (the Meiji Restoration), and with the defeat in World War II thatshattered military rule. More immediate examples abound, however.
The collapse of the Japanese banking system in the 1990s after the real-estate
bubble burst discredited the Ministry of Finance and incumbent financial institutions,making serious (and enduring) financial reform possible. The very weak economy of
the late 1990s—‘the lost decade’—ushered in the reformist Koizumi administration.
The recent bankruptcy of government-coddled Japan Airlines led to the entryof low-cost carriers (with names like Peach and Air Do) that are now plying theskies. The 2011 TŌhoku earthquake sparked the creation of regulation-free zones
in the earthquake-affected areas, with the goal of stimulating entrepreneurshipand new business formation.
The prospects for changes in policy toward immigration, labour markets, andbusiness regulation may, then, turn on whether the reforms are perceived assolutions to crises. Japan faces formidable demographic and structural challenges
that will not only hobble its aggregate GDP growth, but will soon undermine living
standards as well. Indeed, unless steps are taken to offset the size reduction of thelabour force and the lagging growth of labour productivity, per capita income will
start to decline. By the same token, with government debt and the annual deficit
at startlingly high levels, expenditures (especially on social security and medicalcare) need to be cut, and taxes need to be raised very soon.
This last issue (debt and deficits) may be the catalyst. For without a major shift inbudgeting, Japan may eventually face the unthinkable—a crisis of confidence thatexerts pressure for structural change from global capital markets.
Another possible catalyst for change is an incident that drives home to the Japanesethat their declining influence in Asia follows from economic stagnation. China andSouth Korea are not Japan’s enemies, but their rise could yet prove to be the wake-up
call Japan needs to accept the higher levels of uncertainty that are part and parcel ofglobal economic integration.

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The prospects forchanges in policy
toward immigration,
labour markets, andbusiness regulation
may, then, turn on
whether the reforms
are perceived assolutions to crises.

22

LEGATUM PROSPERITY INDEX RANKING:
COUNTRY OVERVIEW

Global Av.

Tokyo

Population (million) (2010)

130.00N/A

Life expectancy (years) (2010)

82.9

69.6

Birth rate (per year per 1000 people) (2010)

922

Fertility rate (births per female) (2010)

1.4

2.8

Life satisfaction* (rated 0 > 10) (2011)

6.3

5.5

Female representation in the legislature (2011)

11.3%

19.5%

Internet access at home? (2011)

84.4%

34.2%

Satisfied with job/work?* (% yes) (2011)

76.0%

73.3%

People are treated with respect in your country* (% yes) (2011)

66%

85.1%

GDP per capita (ppp) (2010)$33,732.90 $14,774.73

INDEX COMPARISONS

SUB-INDEX RANKINGS
12 Economy

Rank/ No. of countries
Legatum Prosperity Index™

22/142Average Life Satisfaction Ranking* (2011)40/142Per Capita GDP Ranking (2010)23/142WEF Global Competitiveness Index (2011)

9/142

UN Human Development Index (2011)

Entrepreneurship

23 & Opportunity

Social Capital 20

Personal Freedom 42

22 Governance

12/187

Tokyo

Heritage/WSJ Economic Freedom Index (2011)

20/179TI Corruption Perceptions Index (2011)14/182

World Bank Doing Business Index (2012)

20/183

Top 3023 Education

Safety & Security 16

Upper Middle (41)
Lower Middle (41)

6 Health

Bottom 30

PROSPERITY INDEX: DATA IN FOCUS
12

ECONOMY

23

Japan

6

Global Av.

Global Av.

5 year growth rate (2010)

0.2%

2.7%

Self-reported health problems?* (% yes) (2011)

16.0%

23.9%

69.1%

61.9%

Hospital beds* (per 1000 people) (2009)

13.7

3.2

Satisfaction with living standards?* (% yes) (2011)

73.7%

59%

Satisfaction with health?* (% yes) (2011)

75.2%

78.8%

Business start-up costs (% of GNI) (2011)

7.5%

36.3%

Human flight 2 (2011)

1.8

5.4

Mobile phones (per 100 ppl) (2011)

102.7

98.7

Safe walking at night?* (% yes) (2011)

70.5%

61.9%

Will working hard get you ahead?* (% yes) (2011)

65.1%

81.1%

Property stolen?* (% yes) (2011)

8.9%

16.8%

Confidence in the government?* (% yes) (2011)

24.9%

53.7%

6

4.8

Confidence in the judiciary?* (% yes) (2011)

69.4%

52.5%

Tolerance for immigrants?* (% yes) (2011)

65.3%

65%

Government effectiveness 1 (2010)

1.40

0.03

Satisfaction with freedom of choice?* (% yes) (2011)

81.4%

73.4%

18:1

25:1

Rely on others?* (% yes) (2011)

91.7%

80.6%

Satisfaction with education quality?* (% yes) (2011)

70.1%

66.6%

Donations?* (% yes) (2011)

32.8%

28%

Perception children are learning?* (% yes) (2011)

88.1%

70.4%

Help strangers?* (% yes) (2011)

24.7%

45.7%

16

SAFETY & SECURITY

42

GOVERNANCE

23

Japan

Confidence in financial institutions?* (% yes) (2011)

ENTREPRENEURSHIP & OPPORTUNITY

22

HEALTH

Civil liberties 3 (2011)

20

EDUCATION
Pupil to teacher ratio (2009)

PERSONAL FREEDOM

SOCIAL CAPITAL

132

108

107

103

101

86

88

67

82
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4

NOTES: 1 Gov. effectiveness: values range from -1.73 to 2.25, higher values indicate higher effectiveness. 2 Human flight: values range from 1 to 10, higher values indicate higher levels of human flight. 3 Civil liberties: values
range from 1 to 7, lower values indicate lack of civil liberties. *Survey data are taken from Gallup World Poll .

REGIONAL RANKING—ASIA
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BUILDING A MORE PROSPEROUS WORLD THROUGH LIBERTY AND RESPONSIBILITY

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