Scandal spurs Japan's pension reform

Mutsuko Tsuyuki is the average Japanese housewife in every way.

    An increasingly aged population strains the system

    She has a husband who works long hours, two young children, as well as a mortgage and bills that she hopes to manage each month while putting aside enough for the annual family holiday.

    And like the average Japanese citizen, she was concerned when the government of Prime Minister Junichiro Koizumi announced plans to revise the nation's pension scheme.

    But she accepted the rationale behind the changes with that well-worn Japanese phrase "shoga-nai", meaning "it can't be helped," when the government's campaign to win over the electorate pointed out that the country's birthrate is declining rapidly while more elderly people live longer.

    Yet, that shoga-nai attitude has been replaced by anger with the realisation that while she and her husband have been conscientiously paying into Japan's obligatory pension scheme, many of the politicians who push the line that it is a duty to contribute have themselves been failing to pay up.

    Obligations shirked


    How do they [politicians] expect the ordinary people to come up with the money when they have been cheating the system?"

    Mutsuko Tsuyuki,
    35-year-old resident, Yokohama

    "I didn't believe it when I heard the first reports, I thought it was just politicians trying to score points," says Tsuyuki, a 35-year-old resident of Yokohama.

    "But now it seems they're all at it. Every day we hear about another politician who claims there has been 'bureaucratic confusion' or they 'forgot' to pay.

    "How do they expect the ordinary people to come up with the money when they have been cheating the system?"

    The latest high-profile politician to admit he failed to contribute is former Prime Minister Ryutaro Hashimoto, whose office admitted on 11 May that he skipped 24 monthly payments.


    And, according to a Kyodo News survey released the same day, 90 of the 725 politicians in both houses of the Diet confessed to missing contributions since they were made obligatory in 1986.

    Of that total, seven are members of Koizumi's cabinet.

    Two politicians felt the need to resign from positions in their respective parties.

    Chief Cabinet Secretary Yasuo Fukuda stepped down on 7 May, while Naoto Kan, the head of the opposition Democratic Party of Japan, resigned on 10 May after considering his position over the weekend.

    Japan's Prime Minister Junichiro
    Koizumi has to balance the books

    Ironically, it was Kan's outspoken attacks on the government that brought about his own downfall.

    With just two months to go until elections for the House of Councillors, the DPJ was chipping away at Koizumi's government on a number of fronts and making progress on the question of Japanese troops in Iraq and opposition to the privatisation of the motorway network.

    The third area where the DPJ was scoring points was on the deeply divisive issue of reforms to the social security system.

    Worsening return

    The DPJ party knew that the Liberal Democratic party and its ally in government, New Komeito, could not be beaten when it came to a vote in the house because of its majority.

    Nevertheless, the DPJ believed it was going to increase its support among a public angry that from next year, its pension premiums will rise while the benefits it receives will decline.

    When it was learned that seven members of Koizumi's cabinet had failed to pay into the state pension scheme, Kan went on the offensive.

    He attacked the LDP's refusal to release details of its politicians' contributions as "unacceptable" and demanded resignations.

    Then, when his own 10-month omission became public knowledge, he had little option but to quit. His party, however, has been quick to try to limit the damage.

    Mix up

    "Those in the cabinet who had not paid their contributions should have looked into the situation thoroughly, but they don't care about the national pension fund at all," said Yukihisa Fujita, a senior member of the DPJ.

    "The image of all politicians has been disgraced by this," he added.

    Yukihisa Fujita, of Japan's
    Democratic party

    But Kan's failure to pay, Fujita emphasised, was the result of an administrative mix-up.

    It was caused by a ministry official assuming Kan had started paying into the public pension system when he stepped down from the Ministry of Health, Labour and Welfare.

    The ministry had previously made automatic contributions of its members' payments to a government service pension scheme.

    "This is a very different thing to not paying," Fujita said. "Mr Fukuda was hiding the fact that he had not paid his premiums, but Mr Kan's failure was simply a bureaucratic error in a very complicated system."

    Mindful of July's elections, the party is trying to cling to some of the high ground that it had acquired before Kan's fall from grace.

    "At the moment, the LDP is in a better position, but the tide may be about to turn because we have revealed the full pension payment records of all members of the DPJ and this is the outcome," Fujita said.

    "We are planning to increase pressure on the LDP to do the same." The message is clear: Mr Kan has done the honourable thing; it is time for the government to do the same.

    New law

    Amid all the politicking, it is almost incidental that the bill that rewrites Japan's social security system was approved by the government on 11 May.

    The percentage of elderly Japanese will surpass the 28% mark by 2025, making Japan an "ultra-aged society".

    In comparison, the elderly in Britain account for 15.6% of the total population, some 12.7% in the United States and just 7.6% in China.

    After managing to win a concession on a review of the system in the future with the intention of integrating the separate pension programmes for the self-employed, salaried workers and civil servants, the DPJ relented and supported the legislation.

    Enactment of the legislation is likely to go through early in June.

    The bills raise premiums to the national pension system every year until 2017, when they will stand at 18.3%. Presently, the figure is 13.58% of a person's income. Benefits, on the other hand, will be slashed to 50.2% of income from 59.3% over the same period.

    And while employees have the contribution deducted automatically from their monthly pay cheque, an estimated 630,000 people were failing to make payments as of October 2001, the most recent figures available from the Social Insurance Agency.

    Most are self-employed, students or unemployed and fall through cracks in the system.

    Age concern

    The government's changes are a result of the "greying" of Japan, which will seriously hamper economic growth as more people become eligible for social security payments and need medical care, yet the tax-paying working sector contracts.

    The tax-paying section of society
    will decline in the future

    "Maintaining the current system [of pension and health care] would pose an excessive burden on future generations and there is a high possibility that it would contribute to the lowering of economic vitality," according to a report released by the Cabinet Office in October last year.

    The number of babies born in 2002 fell to a record low of 1.15 million, down nearly 17,000 from the previous year.

    This brings the number of children borne by a Japanese woman during her lifetime to a record low of 1.32 - well below the level of 2.08 needed to sustain the country's population.

    And when 22.81 million of Japan's 127.11 million people are aged 65 or older - accounting for more than 18% of the population - the government has good reason to be concerned

    Critical mass

    If the decline is not halted, the percentage of elderly Japanese will surpass the 28% mark by 2025, making Japan an "ultra-aged society".

    In comparison, the elderly in Britain account for 15.6% of the total population, some 12.7% in the United States and just 7.6% in China. The urgent question is: who is going to pay their pensions and healthcare bills?

    In an effort to shame non-payers into seeing the error of their ways, the government began a Y620 million ($5.8 million) TV and poster campaign featuring popular actress Makiko Esumi earlier this year.

    Esumi, 37, fixed the Japanese public with a piercing stare from TV screens and warned, "If you pay now you'll be paid later. Do you want to end up crying in the future?"


    The nationwide campaign was clearly an effort to play on the fears of millions of Japanese who will be the country's pensioners of the future but refuse to pay the premiums because of the widespread belief that the system is unsustainable.

    "The system is unpopular because people just don't trust the government or bureaucrats with
    their money"

    Makoto Watanabe,
    media professor, 
    Hokkaido University

    But the effort backfired spectacularly when it was learned that Esumi was also dodging payments.

    "The system is unpopular because people just don't trust the government or bureaucrats with their money," said Makoto Watanabe, a professor of media at Hokkaido University.

    "They talk about reforming the system, but they have not clearly explained about future payments or the provision of pensions for future generations.

    "Plus, of course, the younger generation today does not have the same sense of responsibility as people who are in their 50s had when they were younger," he added.

    "But if no one contributes, the pension system will quickly be bankrupt and that's the end of the country."

    SOURCE: Aljazeera


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