Bill to revise pension program decided on by Cabinet
Prime Minister Junichiro Koizumi stated that his administration would powerfully push such reform forward, since last year's general election had given him a mandate from the public.
In several of our past issues, we have discussed the recent status of Japan's pension system. An overview of the final bill that was recently decided on by the Cabinet is as follows:
1. Raise the premium rate from the current 13.58% to 18.3%.
2. Lower the payment level from the current 59.4% to 50.2%.
3. Cut pensions paid to elderly people who are still working and earning incomes above a set level.
4. Approve the separation of pension beneficiary rights between married couples of circumstances, such as divorce or separation, that necessitate such procedures.
5. Change, by FY2009, the share of National Treasury contributions (tax revenues) in the basic pension part which applies to all the people from the current one-third to one-half.
Our question is, do these constitute a sufficiently fundamental reform of the system?
Initially, the planned bill included more items, such as expanding the scope of application of employee pensions to include part-time workers; approving the separation of pension beneficiary rights between married couples when the pensioner reaches the age of pension payment eligibility; and immediately implementing the raising of the share of the portion funded by tax revenues. However, none of these was incorporated in the recent bill. As for the burden of premiums, although the amount was reduced over that which was proposed in the original bill, the period of raising the premiums was extended from seven years to thirteen years.
In any event, the bill requires the Japanese people to shoulder an even greater burden than before.
Most mass media reviewed the bill in a critical tone, saying that, in view of the elections of the Upper House, which are slated to take place in July, the ruling Liberal Democratic Party and New Komeito were intent on avoiding programs that would act even further to their disadvantage by demanding that a greater financial burden be carried by the public, so much so that they backed away from pushing ahead with their reform agenda.
The Democratic Party of Japan, the leading opposition party, as well as the business community and labor unions, all criticized the bill.
Their comments were as follows: "They are not even approaching the areas related to fundamental reforms; the bill is not worth being reviewed." (Democratic Party of Japan); "The current reform bill increases the burden on the public. There is no way that a sustainable pension program can be established with this." (Japan Association of Corporate Executives); and "The bill does not even come close to fundamental reform of the public pension program, where the hollowing-out trend is accelerating. It is trying, first and foremost, to reduce benefits and to increase the burden on the public: the government is only trying to make their story consistent. The people are losing even more faith in the pension program. The bill should not be approved under any condition." (Rengo)
Roughly speaking, Japan's pension program consists of (1) national pension insurance, which imposes payment obligations on self-employed workers and students, etc., over the age of 20, and (2) employee pension insurance, in which, as a basic rule, half of the premiums is covered by amounts deducted from salary and the remaining half is contributed by the employer. Premiums must be paid for at least 25 years in order for a pensioner to become eligible for benefits.
The number of young people not paying the premiums continues to increase. This has become a growing problem. These people are said to be shying away from joining the scheme because they believe that they risk losing out twice: the program will impose excessive payment burdens on them now, but there is no guarantee that the current pension program will still be operational by the time they become old enough to receive benefits.
Nor do the Japanese people sufficiently understand the essential significance of pension itself as the insurance program, or the system by which it operates.
It remains to be seen if the discussions that are expected to take place in the Diet will increase the people's understanding of the pension scheme as something that is run for their benefit, and that the discussions will be settled in ways that persuade all generations of people that the pension scheme is a system that works for all of them.
