While Japan has achieved outstanding scores on the PISA exams, further improving educational outcomes is important to sustain growth in the face of rapid population ageing. The government should step up investment in early childhood education and care and integrate childcare and kindergarten to improve its quality, while allowing some diversity in the type of institutions. Upgrading tertiary education, in part through stronger competition and internationalisation, is also important to increase human capital and boost the role of universities in innovation. Given the serious fiscal situation, reforms to further raise the efficiency of educational spending per student, which is above the OECD average for public and private outlays combined, are needed. The large share of private education spending, which accounts for one-third of the total, places heavy burdens on families, thereby discouraging fertility, and creates inequality in educational opportunities and outcomes. Reducing dependence on private after-school educational institutions known as juku would help reduce the burden and enhance fairness. This Working Paper relates to the 2011 OECD Economic Survey of Japan (www.oecd.org/eco/surveys/Japan).