Social Impact Bonds in Japan

Japan’s first steps in developing Social Impact Bonds

April, 2017

I am in Tokyo for a third year running, this time to find out about the experiences of the Yokohama City Social Impact Bond (SIB) pilot. It has been a real privilege working with a diverse group of stakeholders from the outset as they initially learned about the UK experience in implementing SIBs, and then took steps to develop and test a model for Japan. I have written previously about specific learning shared with Japanese colleagues. In this blog, I make further comparisons between the Japanese and UK experiences.

Travelling well?

SIBs originated in the UK and have since spread to many other countries. It is easy to understand why the idea of a SIB is so attractive to governments internationally. It purports to only ‘pay for success’ and holds the promise of helping governments save money.

Japan contributed to the OECD’s Social Impact Investment Taskforce’s work to better harness the power of entrepreneurship, innovation and capital for public good. The Japanese Ministry for Education, Culture, Sports, Science and Technology has been funding a five-year study by a consortium led by Meiji University, while three other Central Government departments have expressed interests in developing SIBs. The Nippon Foundation has also played an intermediary role in coordinating three small-scale early pilots in 2015.

It is fair to say that as SIBs developed within and beyond the UK, there has been a constant process of adaptation. Each country has had to do a considerable amount of ‘translation’ to enable the model to be implemented in its particular national, regional and local context.

Japan, similarly, is trying to figure out an appropriate form of SIB that suits its unique socio-political, economic, and cultural milieu. For example, voluntary sector organisations tend to be small and hyper-local; there is a lack of participative governance in terms of the structure of central and local government relationships; and despite the huge national debt the government has no problems accessing cheap capital.

It is therefore naïve, and frankly wrong, to think that there is a singular SIB model that can be transposed with ease.

What might help?

Japan, drawing lessons from the UK, recognised the importance of stimulating the development of a social investment market. Taking a lead from the model set by the UK in creating Big Society Capital (BSC), Japan recently passed the Dormant Bank Account Act whereby a portion of the money will be transferred to a foundation independent from government who will act as a wholesaler (like BSC) in which money is lent or invested in social investment intermediary institutions who go on to invest in frontline social sector organisations. There is also interest in setting up impact bond funds, akin to the ones in the UK.

However, it is not sufficient if governments only see their role in terms of providing the money either to pay for outcomes or to grow the social investment market. In Japan, we hear that the pilots have struggled with being able to identify the right outcome metrics and being able to conduct measurement consistently and robustly. This area seems under-developed in comparison with the UK where the government has invested significantly in developing the evidence base for outcome measurement and for pricing outcomes.

The UK government has also set up the Government Outcomes Lab: a partnership with the Blavatnik School of Government at the University of Oxford, to support commissioners to better engage with outcomes contracting.

There has been legislative change that support development in this area. For example, the social investment tax relief aims to attract individual social investors, complementing Big Society Capital’s effort at growing the market of institutional investors. The Public Services (Social Value) Act additionally requires public bodies in England and Wales to give due consideration to improving local economic, social and environmental outcomes through commissioning.

I will be encouraging participants at the Social Impact Forum at Yokohama City on 22 April 2017 to consider the specific forms of support that should be put in place, and who might be responsible for doing what, to enable SIBs and social investment more generally to flourish in Japan, and in ways that truly bring about social outcomes.

Dr Chih Hoong Sin, Director Innovation and Social Investment – he has been expert advisor to the Japanese Government since 2014 who are keen to explore the potential for implementing Social Impact Bonds in Japan.




The Japanese Government, as part of the Social Investment Group on the G8, expressed an interest in exploring the potential for implementing Social Impact Bonds in Japan in a way that was sensitive to local contexts.

What did we do?

Dr Chih Hoong Sin was invited to share lessons learned from the UK with a Japanese contingent that visited in November 2014. He was subsequently invited by the Japanese Government visit Japan to advise representatives from central and local governments, and charitable foundations, in March 2015. This involved numerous meetings with various stakeholders, covering  diverse aspects such as resourcing; outcome measurement; the role of local voluntary and community sector organisations; implementation, etc. He was further invited to share learning with a second Japanese contingent that visited in October 2015, with a third visit scheduled for September 2016. He was invited back to Japan in April 2016 to advise Japanese colleagues and to speak at a national conference.


The work led directly to Japan taking the first steps in setting up feasibility studies in three prefectures. These were launched in July and August 2015, and funded by the Nippon Foundation. Dr Chih Hoong Sin continues to advice Japanese colleagues, particularly in their first year of implementation. Chih Hoong is currently also providing expert advice for the Yokohama SIB – Japan’s first SIB. Chih Hoong has written a series of blogs about this activity.