were unable to cover operating costs with water bills, and the situation is expected to worsen further due to the declining population. this revision is expected to promote local authorities to commission private businesses to take charge of water services in their areas while retaining local government to permit such projects. however, this revision is very controversial. the privatization of water supply brings about concerns about price increases and deterioration of water charges. several municipalities are currently considering introducing this new scheme. water resources development and bulk water supply the japan water agency (jwa) under the ministry of land, infrastructure, transport and tourism constructs dams, estuary barrages, facilities for lake and marsh development, and canals. it also operates and maintains these facilities, supplying bulk water to other entities, such as utilities, that distribute it to end users. jwa was created by law in 2003 to succeed the water resources development public corporation (wardec) that had been created in 1962. service provision typically drinking water and sewage services are provided by different entities. in 2007 there were 1,572 water utilities and 3,699 sewage utilities in japan. the number of sewage utilities is higher than the number of municipalities, which was only 1,804 down from 3,232 in 1999. the higher number of utilities may be because the merger of utilities lagged behind the merger of municipalities. utilities can be either companies operating under commercial principles, subject to the local public enterprise law, or departments of local government subject to the government accounting system. most water utilities but only few sewer utilities (213) are commercially operated companies. only in a few cities, such as in kyoto, drinking water and sewer services are provided by the same entity. there are also 102 bulk water supply entities, which are often departments of prefectures (such as in osaka), specific water supply authorities (such as in kanagawa) or associations of municipalities. wastewater treatment in japan, wastewater treatment is managed by both the national government and local governments and municipalities. the governmental organizations that contribute to wastewater treatment policies at a national level in japan are the ministry of health, labor and welfare, the ministry of land, infrastructure, transport and tourism, and the ministry of the environment. efficiency non-revenue water average non-revenue water was 7.3% in 2007, varying from less than 5% up to 15%. the low level of water leakage, down from 18% in 1978, has been achieved through speedy repairs that are typically undertaken the same day that a connection is reported, and through the use of high-quality pipe materials. the government's target is to reduce losses to 2% for large utilities and 5% for small utilities. japan is perhaps the only country in the world that also collects nationwide data on unaccounted for sewage, i.e. the amount of water that erroneously enters the sanitary sewer system e.g. through connections from stormwater sewers or groundwater leakage. the average unaccounted for sewerage is 12%, varying from 6% in shiga to 30% in sapporo. labor productivity the number of employees per 1,000 connections is low in international comparison: it is 1.19 for water utilities and 0.62 for sewer utilities, totaling 1.81. it varies between 1.1 in fukuoka to 2.5 in kyoto. this is an indicator of high labor productivity. one reason why the figure is low is that activities such as routine operation and maintenance as well as metering and billing are often outsourced. the level of the indicator would be higher and labor productivity would be lower if outsourced employees had been included in the above figures. performance benchmarking japan has a national performance benchmarking system for water supply and sanitation utilities that operate under the local public enterprise law. financial aspects cost recovery japan has a policy of full cost recovery for drinking water and sanitary sewers through tariffs. stormwater management is considered a public good and is thus financed through general tax revenue and not through water and sewer tariffs. the accounting systems in place clearly distinguish between the two types of expenses, even in systems with combined sewers. the working ratio (share of operating costs in total revenues) averages 49% for water utilities and 67% for sewer utilities, indicating a healthy surplus available for depreciation of assets, debt service and self-financed investments. the cost recovery ratio is 97% for drinking water and 53% for sewerage. tariffs and affordability the average water tariff was equivalent to us$1.33/m3 for water and us$1.13/m3 for sewerage in 2006. because of japan's negative inflation rate during some years (e.g. between 2003 and 2006) real tariffs increase even if nominal tariffs remain unchanged. utilities cannot raise tariffs themselves, but have to receive approval for tariff increases from municipal councils. the combined water and sewerage bill amounts to about 1% of household income and is thus considered affordable. financing investments are financed through bonds issued directly by the municipalities or utility bonds that are backed by municipalities; utilities' own resources; subsidies from the national government (e.g. grants of at least 50% for sanitation); and subsidies from municipalities. investment subsidies are common for sanitation and uncommon for water supply. private financing remains the exception. payments for ecosystem services since the 1970s osaka prefecture has paid the equivalent of more than us$500 million for sustainable forest management around lake biwa, which is the source of the yodo river that supplies osaka with drinking water. this is one of the earliest applications of the payments for ecosystem services concept and was implemented long before this english term became widely used.