| 2. Social Security |
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Japan's social security system, including
pension, nursing care and medical insurance plans, has been
driven into a corner by an aging society and a stagnant economy.
As the average life expectancy of the Japanese rose considerably
in the postwar era, the proportion of the elderly in Japan's
population has been increasing, with 23.6 million people (19%),
aged 65 or over as of October 2002.(*1) The population is now
aging at a pace unprecedented in any country, and the proportion
of those aged 65 or over is forecast to reach 27% in 2017.(*2)
In fiscal year 2001, a total of ¥81.4 trillion, or 22% of
the national income, was paid out in social security benefits.(*3)
The government's white paper on the domestic economy and public
finances for fiscal year 2003, released in October that year,
stressed that Japan had a pressing need to drastically reform
its social security system to redress cost and benefit inequalities
between younger and older generations. The document paid particular
attention to discrepancies between the financial burdens faced
by younger and older generations and the social benefits afforded
to each group.
To address the gap and restore public confidence in the public
pension system, the government has begun serious discussion
on the overhaul of each program. When the social security system
is discussed, however, the reality is that conflicting interests
and desires of individuals, companies, the government and politicians
often complicate the process.
Pension System
Japan's public pension system has two tiers. All citizens from
the age of 20 to 59 years are obliged to participate in the
national pension program, which is intended mainly for farmers,
fishermen, students and the self-employed. In addition to the
national pension program, which forms the basic portion of all
other public pension plans, there are employees' pension schemes
for the private-sector employees and mutual-aid pension programs
for public-service employees, school teachers and others. Because
of declining birthrate and aging population, Japan has seen
a rapid decline of the insurance-contributing population and
a sharp increase of pension-receiving retirees in recent years.
To tackle the issue, the government in 1994 revised the National
Pension Law to lift the age of national pension eligibility
from 60 to 65. In the case of the employees' pension, the eligible
age will be raised gradually to 65 by 2025 for men and by 2030
for women. The employees' pension fund is a defined benefit
plan that determines the amount of benefits in advance. Management
of fund reserves has gone somewhat downhill in recent years,
making it difficult for corporations to cover the deficiency.
Against this background, a Japanese version of the 401(k) defined-contribution
plan, which pays benefits based on investment returns, was introduced
in October 2001.
Hollowing Out of National Pension Program
The number of people who fail to pay premiums to the national
pension program has been steadily increasing, reflecting public
distrust in the pension system itself. In fiscal year 2002,
the number of delinquent contributors to the national pension
program rose to 8.3 million, bringing the premium delinquency
ratio to a record high of 37.2%. Including those who are exempt
from premium payments, about 12 million people have effectively
opted out of the program. This means that one in six members
of the overall public pension program is not helping to shoulder
its costs, highlighting a serious hollowing out of the system.
Since the amount of benefits paid to pensioners cannot be cut,
the decline in premium revenue that has resulted from the increased
number of dropouts has to be covered by about 60 million people,
including subscribers to the employee pension program.
To bring back public confidence in the public pension system,
the Social Security Council, an advisory body to the health
and welfare minister, has been contemplating a carrot-and-stick
approach. The stick consists of tougher measures to collect
pension premiums. The Social Insurance Agency(*4) plans for
the first time in more than 10 years to legally enforce the
collection of premiums from delinquent members of the national
pension program who have adequate income by seizing their assets.
The carrot is to raise the government's share of contributions
to the basic portion of the public pension system to 50% by
fiscal year 2009 from the current 33.3%.
Employee Pension Premiums to Be Lifted
The government reviews the public pension scheme every five
years, In December 2003, with the ruling coalition parties,
it finalized a pension reform package for fiscal year 2004 which
includes a gradual increase in premiums for the employee pension
program starting October 2004. The premium rate, currently set
at 13.58% to the annual pre-tax income, will be raised by 0.354
percentage point each year until it reaches 18.35%. Benefit
levels will be maintained at 50% or more of the working-age
taxpayers net income. The premium hike is expected to add some
¥400 billion to the financial burden on the public in fiscal
year 2004, with the burden estimated at ¥900 billion from fiscal
year 2005.
Premiums for the employee pension program—which are split
equally between employees and employers—will be raised
over 13 years, at which time the rate will be capped, according
to the proposed laws. The business community is increasing its
opposition to the steep premium hike. As a part of the pension
reform plan, a system will be adopted in which benefit payments
are automatically reduced within fixed parameters according
to factors associated with the declining birthrate and the aging
population.
Under the pension package, the government's share of contributions
to the basic national pension program will be raised to one-half
by fiscal year 2009 from the current one-third. Injecting more
tax revenue would enable keeping a lid on premium rate increases.
But it remains unclear as to where the necessary revenues are
to be derived to finance this increase by that time. To finance
the increased burden, about ¥3 trillion in
additional revenue will be needed each year. Revenue from a
reduction in tax breaks for pension recipients and the elimination
of a tax benefit for the elderly will be earmarked for the government's
higher pension burden starting in fiscal year 2004. While the
measures will generate about ¥40 billion in 2004 and around
¥240 billion in fiscal year 2005, they fall far short on
the required amount. Plans to reduce a 1999 income tax cut and
raise the consumption (sales) tax will be considered for inclusion
in fiscal year 2007 tax revisions at the earliest.
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*1. http://www.stat.go.jp/data/nenkan/zuhyou/y0209000.xls
*2. http://www.ipss.go.jp/Japanese/newest02/1/suikei_g.html
*3. http://www.ipss.go.jp/Japanese/kyuhuhi-h13/2/No2.html
*4. http://www.sia.go.jp/index.htm
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Medical/Health Insurance System
Japan's social insurance system started in 1927 when the Health
Insurance Law was enacted. By 1961 all Japanese citizens were
covered by a health insurance. There are two major medical insurance
systems. National health insurance is managed by municipalities
or by national health insurance associations for the benefit
of those who are not eligible for coverage by an employees'
health insurance system. As for employees' health insurance,
there are a variety of plans, including a government insurance
plan, and non-government group plans established by an employer
or jointly by a number of employers. Every resident of Japan
is covered by one of these above-mentioned systems.
On the back of the rapid aging of Japan's population, national
medical-care expenditures began rising rapidly in the early
1970s, and in fiscal year 1999 they exceeded ¥30 trillion
for the first time to reach ¥30.93 trillion, leading to
sizeable deficits for the various insurance systems. In fiscal
year 2002, the government-managed health insurance program that
mainly covers workers at smaller companies produced a record
deficit of ¥558.8 billion, the tenth consecutive year in the
red. The deficit was due largely to a decline in premium revenue
and the rise in medical costs for the growing elderly population.
As a result of the massive loss, the program's special reserves
for covering the deficit have been exhausted. Corporate health
insurance societies, which number about 1,700 nationwide, had
a combined loss of ¥400.3 billion in the same fiscal year,
marking the worst year in losses on record, according to the
National Federation of Health Insurance Societies. The proportion
of societies saddled with deficit to the total reached 80.6%,
exceeding 80% for the first time. The societies' recurring revenues
fell 1.9% from fiscal year 2001 to ¥5.67 trillion due to
a sharp drop in premium revenues.
Pressured to reform the debt-generating health insurance system,
the government raised the portion of medical cost to be borne
by insured workers from 10% to 20% in September 1997 and further
to 30% in April 2003. Partly due to these measures, the figure
decreased 0.7% to ¥30.2 trillion (¥237,000 per capita),
the first decline since fiscal year 2000.(*1)
New Insurance System for Elderly Planned
In March 2003, the cabinet approved a blueprint for medical
reform focusing on the creation of a new health insurance plan
for people 75 years or older. The proposal is intended to require
senior citizens, who are constant users of medical services
under the public health insurance program, shoulder more costs
and thus ease the burden on younger generations, in hopes of
returning the nation's public health insurance system to a sound
financial footing. The plan, to be implemented in 2008, will
be funded by existing health insurance programs and government
subsidies, as well as premiums paid by participants.
The blueprint further recommended funneling funds from a health
insurance program for salaried people to support a plan for
self-employed and retired people that has many subscribers aged
65-74, an age group that also uses medical insurance more often
than those still working. Among other proposals in the draft
reform plan was to shift the management of the health insurance
program for self-employed and retired people to prefectural
governments from city, town or village authorities. It also
recommends another health insurance scheme, mainly for employees
of smaller companies, to be placed under the control of prefectural
governments instead of the central government.
Nursing Care Insurance
As a result of the rapidly aging society, the number of elderly
people requiring care has been growing, and the burden imposed
on the family has been increasing accordingly. In a bid to help
reduce the burden, in April 2000, the government introduced
a long-term public nursing-care system for the elderly. Under
the insurance system, which is operated by each municipal government,
people aged 40 or older pay premiums, and nursing-care services
are provided for the elderly who meet certain criteria. Ninety
percent of the cost is covered by the insurance. As of August
2003, there were 3.65 million beneficiaries of this insurance.(*2)
According to an estimate by the All-Japan Federation of National
Health Insurance Organizations (*3), costs paid out under the
public nursing care insurance plan in fiscal year 2002 jumped
13.7% to ¥5.19 trillion, among which home-care services
surged 25.7% to ¥2.14 trillion.(*4) In fiscal 2002, the
annual average number of elderly receiving care at home rose
20.5% to 1.86 million, of which those classed as requiring lower
levels of care increased markedly.(*5) The number of residents
in nursing facilities increased 9.3% to 0.7 million.(*6) Since
the government revised its policy and now prioritizes the admission
of those in serious condition into nursing homes for seriously
ill or senile people, the number of those in need of maximum
care at such facilities has risen more than 10%.(*7)
Because of the ever-increasing cost of maintaining the insurance
system, policy-makers are already debating reform of the nursing
care insurance system. One of their proposals is to collect
insurance premiums from a wider sector of the population, namely
people in their 20s or 30s. The fiscal 2003 budget for nursing
care-related expenditure has risen to ¥5.4 trillion, up
from just under ¥4 trillion in fiscal year 2000 due to an
increase in the elderly population.(*8) Consequently, premiums
collected from those aged 65 and older jumped by 13.1% to ¥3,293
per month beginning in April 2003.(*9)
AIDS and HIV
The number of newly-infected AIDS patients and HIV carriers
reported in Japan in 2002 totaled 896, bringing the cumulative
number to 7,670, according to the health ministry's AIDS Surveillance
Committee.(*10) But the actual number of people with AIDS is
believed to be several times larger, including those unaware
that they are infected. People infected with AIDS in Japan are
mostly in their 20s and 30s, infected mainly through sexual
intercourse. Between 1995 and 2002, the number of new AIDS patients
in Japan doubled.
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*1. http://www.mhlw.go.jp/topics/medias/year/02/1.html
*2. http://www.mhlw.go.jp/topics/kaigo/osirase/jigyo/0308.html
*3. http://www.kokuho.or.jp/index.htm
*4. http://www.kokuho.or.jp/shiryou/lib/kyufu_jyokyo_2002.xls
*5. http://www.kokuho.or.jp/shiryou/lib/nintei_jukyu_200304_02.xls
*6. http://www.kokuho.or.jp/shiryou/lib/nintei_jukyu_200304_02.xls
*7. http://www.kokuho.or.jp/shiryou/lib/nintei_jukyu_200304_02.xls
*8. http://www.mhlw.go.jp/topics/2003/bukyoku/rouken/1.html
*9. http://www.mhlw.go.jp/shingi/2003/05/s0526-3g.html
*10. http://www.mhlw.go.jp/houdou/2003/01/h0131-3.html
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Social Welfare & Public Assistance
Child Welfare
With the ultimate aim of decelerating Japan's spiraling birthrate,
the government formulated the Angel Plan in December 1994, which
outlines the basic direction of child-raising support measures,
and promotes day-care for children under three years of age
and extended day-care for preschool children.(*1) Despite these
efforts, the fertility rate in Japan—the average number
of children born per woman during her lifetime—has been
in decline, with the figure standing at 1.32 in fiscal 2002.(*2)
Put another way, for every 200 people in Japan (100 couples),
only 132 children are born.
In an effort to make life easier for parents to work and care
for their children, the health ministry plans a legislative
revision that will extend child care leaves of absences granted
to either parent to a maximum of one and a half years, up from
the current maximum of one year, under certain circumstances.
Under the system now in place, a parent can take one leave of
absence from work of up to a year before his/her child reaches
the age of one year. Government-managed employment insurance
provides a benefit equal to about 40% of the parent's normal
wage.
Even so, a Ministry study conducted in 2002 showed that only
64% of women and just 0.33% of men took advantage of the system.(*3)
The primary reason is that most people find it too hard to look
after a career and raise a family simultaneously. This is especially
true for working women, who still bear most of the burden of
caring for children. According to a survey conducted in 2001
by the Ministry, 72.8% of women who gave birth to their first
child quit their jobs after finding it too difficult to balance
the demands of child-care and work.(*4)
Livelihood Protection
Livelihood protection is a system whereby the state guarantees
a minimum standard of living for persons who have become so
poor that they cannot maintain a decent standard of living on
their own. The system offers seven categories of aid: living,
housing, education, medical care, maternity, employment, and
funeral. The protracted economic slump has exacted a heavy toll
on the lower-income strata of society, as seen in the steady
rise in recipients of public livelihood assistance over the
past nine years. A survey by the Health, Labor and Welfare Ministry
shows that an average of 837,099 households per month received
public aid in fiscal year 2002 (*5), or 18.2 out of every 1,000
housholds. The number was up 43 percent from 1992, when it reached
a low of 585,972.
Public welfare assistance is in line with the Daily Life Protection
Law, which took effect in 1950, as part of the constitutional
right to "maintain the minimum standards of wholesome and
cultured living. "Public assistance rate in fiscal year
in 2001 stood at 8.65% (*6), lagging behind other industrialized
countries' welfare coverage. A 1999 welfare ministry white paper
said the aid coverage rate in other industrialized countries
averaged around 10 percent.(*7) The gap is attributed in part
to the government failure to protect many in need of public
aid, including the growing homeless population. According to
the latest survey by the welfare ministry, there were 25,296
homeless people nationwide as of January-February 2003.(*8)
Unemployment Relief
Measures for dealing with unemployment in Japan include unemployment
insurance and the employment adjustment subsidy system. Because
of deteriorating financial standing of the public unemployment
relief program in line with the growth of joblessness in recent
years, the government in April 2003 enacted a revised Employment
Insurance Law designed to reduce unemployment benefits for salaried
workers who lose their jobs.(*9)
Unemployment benefits, which equal 60-80% of the daily salary
earned during employment, are paid for 90-360 days, with full-time
employees eligible to receive benefits longer than part-timers.
Under the revised law, which took effect in May 2003, the minimum
benefit payment was lowered from 60% to 50% of the salary received
before loss of job, while maximum payment was also cut. It also
equalized the period of eligibility between full-time and part-time
workers. With the new program in place, the Ministry of Health,
Labor and Welfare expects the revised unemployment insurance
program to remain solvent even if the jobless rate rises slightly
above 6%, from the current level of just over 5%.
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*1. http://www1.mhlw.go.jp/topics/syousika/tp0816-3_18.html
*2. http://wwwdbtk.mhlw.go.jp/toukei/youran/data14k/1-24.xls
*3. http://www.mhlw.go.jp/houdou/2003/07/h0717-1a.html
*4. http://www.mhlw.go.jp/wp/hakusyo/josei/01/point.html
*5. http://www.mhlw.go.jp/shingi/2003/10/s1014-6a3.html
*6. http://wwwdbtk.mhlw.go.jp/toukei/youran/data14k/3-01.xls
*7. http://www1.mhlw.go.jp/wp/wp99_4/chapt-a3.html
*8. http://www.mhlw.go.jp/houdou/2003/03/h0326-5.html
*9. http://www.mhlw.go.jp/houdou/2003/04/h0425-3a.html
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