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Federal Reserve Bank of Minneapolis
Staff Report
On Financing Retirement, Health Care, and Long-Term Care in Japan
Ellen R. McGrattan
Kazuaki Miyachi
Adrian Peralta-Alva

Japan is facing the problem of how to finance retirement, health care, and long-term care expenditures as the population ages. This paper analyzes the impact of policy options intended to address this problem by employing a dynamic general equilibrium overlapping generations model, specifically parameterized to match both the macro- and microeconomic level data of Japan. We find that financing the costs of aging through gradual increases in the consumption tax rate delivers better macroeconomic performance and higher welfare for most individuals relative to other financing options, including raising social security contributions, debt financing, and a uniform increase in health care and long-term care copayments.

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Ellen R. McGrattan & Kazuaki Miyachi & Adrian Peralta-Alva, On Financing Retirement, Health Care, and Long-Term Care in Japan, Federal Reserve Bank of Minneapolis, Staff Report 586, 07 Jun 2019.
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Keywords: Retirement; Health care; Taxation; Aging; Japan
DOI: 10.21034/sr.586
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