Education Financing System in Japan

Education Financing System in Japan

The introduction of a modern education into Japan, taking several Western countries as models, began in the latter part of the 19th century. The arrival of modernization in Japan was therefore comparatively late, but education underwent very rapid development within a short space of time. In that time, the following particular socio-cultural conditions in Japan were favorable for the development of education.

Initial conditions favoring the development of modern education

(1) For the preceding 250 years of the Edo period, during which Japan followed a policy of keeping the country closed to the outside world under the Tokugawa shogunate (1603-1868), the country enjoyed a long period of peace and social stability. Under these conditions, the people of Japan were able to attain quite a high level of cultural maturity. There was a relatively wide diffusion of distinctively Japanese educational institutions. For the samurai warrior class, there were institutions for public education (Hankô or fief schools) in which to learn classic Chinese literatures (Confucian Studies). On the other hand, private academies (Shijuku), equivalent to secondary schools, developed and were open to all regardless of Social classes. And there were also a large number of popular learning houses called Terakoya, which concentrated on teaching the practical skills of reading and writing to the commoners. Among the merchant and the technician-worker classes, an apprenticeship system was developed. And among the people it was popular to learn the tea ceremony, flower arrangement, classical musical instruments and other traditional arts.

(2) Education had a strongly secular character, and the traditional religions such as Buddhism and Shintoism did not have their own distinctive educational institutions. Moreover, thanks to comparatively homogeneous cultural and linguistic traditions, there was no problem with making Japanese the sole medium of teaching from the start.

(3) As a result of the feudal system and the system of social classes, the formation of a common national consciousness had been held back. However, amidst the atmosphere of crisis in the face of external pressure at the end of the Edo period, there was a strong awareness that national unity and national consciousness could be formed through education. In the process of groping to modernize the nation in the mid-19th century, a consensus was formed with the aim of abolishing the traditional class system and offering an equal educational opportunity to all people of Japan.

(4) Near the end of the Edo period, a system that recruited people on the basis of individual knowledge and ability was introduced in place of the traditional class system. It became clear that the elite members of the society were being selected on the basis of their academic attainment. In this way, the initial conditions had been lain for the advent of a “academic-credentials society” in which employment and social status were decided on the basis of a person’s educational attainment.

(5) Japan maintained its independence and as it was not colonized by the great powers of the West, it did not have the colonial legacy in education introduced by former rulers, as was the case with many other developing countries. Consequently, at the time that the modern educational system was introduced, Japan was able to select at will and to try out various models provided by different developed countries.

Educational Finance in Japan

Educational Financing in the Prewar Period:

The “Education Ordinance,” constituting the first modern educational law to be enacted in Japan, used the concept of a school district as the unit for educational administration; the school district was also adopted as the unit for educational financing. Putting this in more specific terms, each school district was expected to raise the necessary funds for establishing and running the school that served that district, so that an elementary school district would find the funds for the elementary school in that district, and a middle school district would do the same for the middle school serving that district. The priority for the national government at this time was to establish a system of higher education so that Japan could speedily incorporate the skills and knowledge from Western countries. With this aim in mind, the government used the larger part of its educational budget to employ many foreign teachers at very high salaries, and to send Japanese students to study overseas in advanced Western countries. The result of this situation was that the construction and running of elementary schools inevitably depended on local government funds, taxes levied on local residents, and income from tuition fees. Specifically, each school district was required to put together the necessary funding by means of a combination of taxation, donations and tuition fees. Regulations regarding the payment of subsidies from central government to prefectures did exist at this time, but the amount involved was very small, and the distribution formula was unclear. And in 1880, the system of national subsidization was itself abolished.

As the country moved toward a new age, the government emphasized the necessity of self enlightenment, the provision of opportunities for advancement through education, and the practical value to be gained from education; in this way, it justified the formula used in educational financing, whereby “those who benefited should bear the burden of the cost.”

In this situation, it was entirely natural that there should be outbreaks of resistance by residents and parents against the considerable financial burden imposed on them by the use of this formula. An expression of this resistance can also be seen in the low enrollment in the early days of the introduction of a modern school system. Moreover, in some cases, resistance even went as far as burning down schools. But that said, and despite the use of the formula as set out here, within a few years after the implementation of the modern school system, over 20,000 elementary schools were in fact established throughout Japan. Looking at these figures, it seems fair to say that among residents and parents in Japan at this time, there were those who anticipated great things from the new schools and who were ready to submit to the financial burden and to make efforts to raise the necessary funds. This is why, in contrast to the centralized pattern of educational administration, if we look at schools from the point of view of funding, it is entirely legitimate to say that the starting point of elementary schools in Japan was very clearly community based.

Unification of the Educational Financing Burden Levied on Municipalities, and Movements to Begin (restart) the System of Central Government Subsidies

The 1880s, when local government bodies initially took shape, gave way to the 1890s, when as a result of the Second Elementary School Law of 1890; the total costs of elementary schools became the responsibility of municipalities (cities, towns and villages). In principle, the system of tuition fees was maintained, but the income was in fact treated by municipalities as a minor handling charge, and in 1893, those municipalities that were able to do so, were permitted to abolish tuition fees completely. In 1900, as a result of the Third Elementary School Law, tuition fees were abolished in principle for all elementary schools. On the other hand, along with the spread of compulsory education, the burden of educational financing borne by municipalities steadily increased. It is against this background that increasingly strong demands were made for a restoration of the system of national subsidization, which had been in abeyance since 1880. In 1896, a national subsidy toward primary education costs was restored in the form of assistance in improving teachers’ salaries (special allowance for long service). Moreover, in 1900, through the enactment of the “Law concerning the National Treasury’s Share of Municipal Elementary School Education Expenses,” the government broadened the scope of the national subsidy for primary education costs. The amount of the national subsidy was set at 1 million yen a year, and was distributed to prefectures in accordance with the number of children of school age and the number of children attending school. In addition, in 1907, the duration of compulsory schooling was extended from 4 to 6 years, and accompanying a substantial rise in elementary school teachers’ salaries, provision was made for each prefecture to pay from 1908 a subsidy equal to that received from the national treasury; the sums received in this way were used to supplement the salary of elementary school teachers and to make a payment toward the cost of their housing. But even with all the above, despite the start of a system of subsidy from the national treasury, the percentage of the total running costs of municipal schools met by this subsidy throughout this period did not rise above the very small figure of 1%. In contrast to this, teachers’ salaries paid by towns and villages in the 1900s exceeded 40% of their total disbursements. Consequently, the demands for higher national subsidies toward education costs became increasingly strong.

Legal Base for the National Treasury’s Share of Compulsory Education Expenses

In 1918, the “Law concerning the National Treasury’s Share of Municipal Compulsory Education Expenses” was passed. Under this law, the national treasury would disburse the sum of 10 million yen or more a year as a payment to partially defray the cost of salaries of teachers employed in municipal (city, town and village) elementary schools. In contrast to the previously existing law, which had focused on “assistance” from the state as its main objective, a noticeable characteristic of the new law was that the concept of sharing or apportioning responsibility for compulsory education expenses between the national government and the municipalities was firmly established. The basis for the distribution of the national government’s share was the number of teachers and the number of children, but a formula was adopted whereby those municipalities that were particularly weak in terms of financial resources could receive an extra amount. The sum disbursed by the national government as its share amounted to 40 million yen in 1925, 70 million yen in 1926, 75 million yen in 1927, and 85 million yen in 1930. In 1940, the financial relationship between central and local government was changed, and a financial adjustment system took shape, whereby the central government returned money acquired from tax revenue to local governments. At the same time, the “Law concerning the National Treasury’s Share of Municipal Compulsory Education Expenses” was revised, and a new law, namely the “Law Concerning the National Treasury’s Share of Compulsory Education Expenses” as well as an Imperial edict, “Concerning the Salary and Travel Expenses of Municipal Elementary School Teaching Personnel,” were promulgated. Under the new laws, the formulae employed were that responsibility for the payment of teachers’ salaries and their traveling expenses on the occasion of transfer to a different school was transferred from the municipality to the prefecture, and that half the sums involved would be paid by the national treasury. In other words, instead of a fixed sum being paid by the national treasury, a fixed percentage amounting to half of the actual sum disbursed by the prefecture would be paid. The transfer of responsibility for the salaries of elementary school teachers from the municipality to the prefecture, removed the burden on municipal funds, and at the same time, opened the way to the possibility of strengthening educational conditions relating to school facilities and structures, and adjusting the criteria governing teachers’ salaries to an appropriate level over the country as a whole.

Educational Financing in the Postwar Period:

Postwar Japan faced problems of securing finance to deal with such problems as restoring school buildings and facilities destroyed by war and constructing new buildings to cope with the effects of the decision to make secondary education compulsory. For its part, the national government agreed to pay half of the cost of constructing school buildings and one-third of the cost of equipment.

However, in practice, confusion continued with, for example, education budgets being cut by 10% or funds for the construction of lower secondary schools being completely wiped out as a result of budget shrinkage caused by postwar inflationary pressures. One case followed another of the heads of local government bodies resigning or committing suicide in their desperation at their inability to find funds to construct lower secondary schools. Furthermore, on the basis of recommendations made by a mission of tax system specialists sent from the U.S., the “Law Concerning the National Treasury’s Share of Compulsory Education Expenses” was annulled, generating confusion in efforts to secure teachers’ salaries. The inadequacy of education budgets and the accompanying confusion lasted until about 1950, but in 1952, the above law was resuscitated and a system of support newly established. From this time on, the formula whereby half the personnel costs of teaching staff in compulsory education schools were borne by the national treasury became the basic formula for educational finance. And by the enactment in 1953 of the “Law concerning the National Treasury’s Share of Local Public School Construction” and the “Law concerning Special Measures to Promote the Reconstruction of Dangerous Schools Buildings,” a legal foundation was laid down for national government assistance in the construction or reconstruction of school buildings and facilities. In 1958, these laws were reformulated and unified into the “Law concerning the National Treasury’s Share of Expenses for Various Compulsory Education School Facilities.” Through these various laws, it was decided that the national treasury would bear half the cost of necessary expenses for the construction or enlargement of buildings for public elementary and lower secondary schools, half the cost of the expenses for the construction of indoor gymnasia, and one-third of the cost of expenses for reconstructing buildings which were in a structurally dangerous condition.

Aid for Private Schools

A combination of war damage and postwar confusion also inflicted heavy blows on private schools. For this reason, the government decided in 1946 to create a special fund for the reconstruction of war-damaged private schools and to introduce a system of lending public funds to private schools. In addition, in response to demands calling for the strengthening of the system of long-term, low interest loans of public funds targeted at private education, the government enacted in 1951 the “Private School Promotion Law,” and established the totally government-funded “Private School Promotion Association” as a special juridical entity with the purpose of creating a channel for the ongoing loan of public funds aimed primarily at the expansion and strengthening of private school facilities. Since its establishment, the Association has continued to function in this way.

The Enactment of the Laws to Promote Various Priority Measures and the Establishment of Financial Support for Specific Target Areas

Through measures of the kind outlined above, the government had by about 1952 put a basic framework for postwar educational financing firmly in place. In parallel with this kind of frame work building, from the beginning of the 1950s, the government identified areas within education which were lagging behind in their development, or in which there was a particularly urgent need for action in terms of policy-level priorities, and adopted measures to give such areas favorable treatment in terms of educational financing. The succession of laws enacted with these aims in mind includes the “Industrial Education Promotion Law” (1951), the “Science Education Promotion Law” (1953), the “Law for the Promotion of Education in Isolated Areas” (1954), the “School Lunch Law” (1954), the “Law concerning the National Treasury’s Share for the Encouragement of School Attendance of Pupils having Financial Difficulties” (1956), and the “School Health Law” (1958). Through these various laws, the government set out specific criteria aimed at strengthening the facilities and infrastructure in the areas targeted by the respective laws, and decided that in cases where local government bodies or schools made determined efforts to meet the criteria, national funds could be used to meet one part or the majority of the costs involved. With regard to running costs in local education other than the examples given above of special assistance from the national treasury, the government undertook to meet these by establishing a source of finance whereby a fixed percentage of the revenue from different kinds of taxation (income tax, corporation tax, liquor tax, consumption tax, and tobacco tax) would be granted to local bodies (prefectures and municipalities) through a local grant tax allocation system.

Securing Capable Personnel and Improving Teachers’ Salaries

In 1974, the “Law to Secure Capable Education Personnel1” was enacted. This law was based on a recommendation in the report issued in 1971 by the Central Council for Education on the need “to change and renew the system of teachers’ salaries so as to ensure that the salary a teacher receives is sufficient to encourage outstandingly capable personnel to wish to enter the teaching profession of their own accord and to be ready to respond to the responsibility of a post that demands a high level of professional specialization and administrative skill.” In the context of the lively activity that the labor market had displayed during the continuing period of high economic growth, there had been a tendency for people of outstanding talent to concentrate in private companies, and the intention of the 1974 law was to recruit such capable people into the teaching profession in opposition to this tendency. Following the enactment of the law, during the period 1974-78, the salary of teachers in compulsory education schools was revised three times, so that at the end of this process it had risen by 30% and was higher than the salary paid to general civil servants. There is no doubt that after these reform measures were implemented, the traditional image of a teacher’s job as being equal to a low salary was completely dispelled. Following the measures, the competition in the examination organized by prefectural boards of education for appointment as a teacher rose sharply, and in economic terms too, the teaching profession became a very popular option among young people. Moreover, from this point on, it was possible to observe a lowering of the organizational power and influence of the Japan Teachers Union, which had been maintained for a long period after the end of the war, and its aggressive posture also became weaker.

The Educational Financing Reform Debate in the National Council on Educational Reform

The National Council on Educational Reform, which deliberated and issued its report during the 1980s, made the following suggestions concerned with educational financing:

A new division of roles between the public and private sector and a system of cooperation

Since the Meiji era, the foundation of Japan’s national objectives has been, the report said, to catch up with the advanced industrialized nations of the West, and by the end of the early modern period, the levels of education, culture and daily life in Japan had risen remarkably, and the people were demanding more sophisticated and more diversified content in the various activities comprised in the fields of education and research, and of culture and sport. With a view to responding flexibly and effectively to this situation, there is a need to tackle the restructuring of the respective roles of the public and private sectors, aiming at an effective system of cooperation in a new dimension which can bring together on the one hand the public service configuration and on the other hand, the private service configuration, which sets free competition and choice as its preconditions. From this perspective, we propose that Japan should continue, the report said, to set out clearly the areas in which educational administration and finance should be involved (responses to basic needs) and the areas which should fundamentally be entrusted to the vitality of the private sector (responses to diverse and high-level needs which go beyond basic levels), and should make a radical examination of the ideal pattern of meeting educational costs from public funds.

Strengthening of educational finance and prioritized distribution

With regard to the promotion of educational reform, the report said, there is a need, while making efforts to achieve a prioritized and efficient distribution of funds which has regard for the direction of reform, to devise appropriate measures which have regard for public finance as a whole. From now on, the report said, while continuing to respond to changes in the domestic and foreign environment, Japan should endeavor to achieve a bold, prioritized distribution of funds, with the aim of qualitatively enhancing educational and research standard in such areas as the strengthening of basic research, the qualitative strengthening of higher education, and the strengthening of healthy bodies and minds.

Rationalization and increased efficiency in educational finance

There is a need to re-evaluate the division of roles and the division of expenses between central government and local governments across the whole range of existing systems and policies, and to aim at rationalization and increased efficiency in educational finance, carrying out a re-evaluation from such perspectives as the rationalization of management tasks, appropriate adjustment of the balance in terms of the burden to be borne by beneficiaries, and utilization of financial resources. On the basis of this kind of thinking, such items as the methods of providing national funds for compulsory education, the ways of providing school lunches, and the utilization of properties should be looked at again.

Exploiting private-sector vitality

There is a need, the report said, to aim at positive encouragement of private-sector vitality through deregulation and other ways, from the perspective of promoting the revitalization and rationalization of education. Measures that should be considered include relaxation of the regulations concerned with the establishment, administration and management of schools, the use of tax measures to encourage donations, simplification of procedural formalities, utilization of the third sector and of volunteers, and entrusting facilities to the private sector.

Reducing the burden on households of educational expenditure

The excessive rise in the cost of education has also become a problem from the perspective of guaranteeing equality of educational opportunity. Accordingly, it is necessary, when thinking about tax reforms, to take special account of those sections of society on which the burden of educational costs falls heavily, for example, people in their forties and fifties who are likely to have children in upper secondary school or university. Efforts should be made, the report said, to improve and strengthen the scholarship system, including examination of scholarships and student loans operated in parallel and targeted at outstanding graduate students and those engaged in high-level research.

In fine, we can say that, a major characteristic of Japan is that whereas in the area of educational administration, the Japanese system had a highly centralized character, in contrast to this, in the area of educational finance, right from the very early stages after the introduction of a modern education system, the provision and the distribution of educational funding was carried on within a relatively decentralized system. Even within the area of public-sector education, the system adopted was that higher education was a national responsibility, secondary education was a prefectural responsibility, and the responsibility for the costs of the compulsory stage of primary education rested completely with individual municipalities (cities, towns, villages). In principle, central government did not contribute to the costs of compulsory education, but in practice there was a gradual expansion of disbursements by the national treasury in the form of assistance given on an exceptional basis for specific purposes such as the construction of school buildings or improvements in teachers’ salaries. During World War II, responsibility for the running costs of compulsory education was shifted to prefectures, and a law was enacted specifying that half these costs would be met by the national treasury. This system continued in the postwar period.


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  • Class Notes of Japanese Studies, 6th Batch, Japan Study Centre, Dhaka University.