Japan's national health expenditure has been increasing by 5% annually (approximately 1.3 trillion yen) and is expected to reach 30 trillion yen in the 1999 fiscal year. This increase is mostly due to the country's rapid aging rate. However, Japan's current slow economic growth, combined with a decrease in the average number of children per family, raises the issue of how these health-expenditure increases can be afforded as the health care system continues to provide appropriate levels of essential health care services. To understand these health-expenditure trends, one must first recognize that the Japanese health care system is characterized by the country's social health insurance system, which is based on the Social Insurance Act. It is also important to consider the impact the medical fee schedule has on clinical practices. This article reviews the situation surrounding national health-care expenditures and the related issue of social health-insurance reform. In this, several topics closely connected with cancer therapies are also examined.