A Finance Ministry panel on Tuesday urged the government to limit increases in social security expenses in fiscal 2016 as the state tries to rein in the costs of a graying society.
“We’d like to call for limiting the increase for the ‘graying factor’ to a little less than ¥500 billion ($4.07 billion)” from the previous year, it said in a set of recommendations handed to Finance Minister Taro Aso.
Social security-related expenses account for the largest slice of a budget request for the fiscal year starting April 1. The health ministry is asking for an increase of ¥670 billion in medical and other spending on top of an overall request of ¥30.67 trillion.
To curb expenditure, the panel called for a review of medical service fees and pharmaceutical costs.
The panel said fees for doctor services need to be lowered in addition to drug prices. A cut in the fees would be the first in 10 years.
A 1 percent cut in the official medical service fees would push down the country’s annual medical costs by ¥430 billion.
The panel stressed that the fiscal 2016 budget will be key to successfully completing the government’s five-year economic and fiscal rehabilitation plan through fiscal 2020, when it is hoped the primary balance deficit will become a surplus.
Japan’s economic health is the worst among industrialized nations with public debt at more than 200 percent of nominal gross domestic product.
A deficit in the primary balance means the government cannot finance its annual budget, excluding debt-servicing costs, without issuing new bonds.
Under a fiscal and economic policy adopted in June, the government will aim to peg the rise in social security spending to ¥1.5 trillion over the three years through fiscal 2018, the same level as the past three years.
Although the figure is described only as a “benchmark” and not a target, the advisory panel urged the government to stick with the plan.
“There is a benchmark set for social security expenses, but curbing the increase in expenditure must not be postponed just because it is a benchmark for three years,” the panel said.