Reform of Japan’s pension system surfaced as a key issue in the leadership election of the ruling Liberal Democratic Party after administrative reform minister Taro Kono, one of the four candidates for LDP president, made a bold reform proposal.
Kono called for creating a guaranteed minimum portion of public pension that is completely funded by tax revenues instead of premiums. While a major tax increase is believed to be necessary to implement this reform plan, Kono has not made specific explanations about financial resources.
The other three candidates — former LDP Policy Research Council Chairman Fumio Kishida, former internal affairs minister Sanae Takaichi and LDP Executive Acting Secretary-General Seiko Noda — indicated a skeptical attitude toward Kono’s proposal.
Japan’s current public pension system is made up of two programs — the kokumin nenkin program, chiefly for the self-employed, and the kosei nenkin program, mainly for corporate employees. Half of the kokumin nenkin program is financed by tax revenues and the other half by premiums.
Under the current system, low-income people who are exempt from paying premiums have the amount of pensions they can receive in the future reduced. “A stable pension system is meaningless if people cannot receive enough pensions to live on,” Kono said, proposing the introduction of the system that guarantees a minimum pension payment regardless of the amount of contributions made.
But Kono has not indicated the size of financial resources that would be necessary for the proposed system’s creation and how far the consumption tax rate may have to be raised.
The introduction of such a pension system was included in the former Democratic Party’s election campaign pledges but the party could not fulfill the pledge even when it assumed the reins of government as it was unable to secure necessary financial resources.
The other three candidates questioned the feasibility of Kono’s plan, with Takaichi saying, “The tax will have to be raised to a considerable degree.”
The labor ministry has been working on expanding the scope of coverage of kosei nenkin program in stages, having part-timers and other short-time workers join the program so that the amount of pensions they can receive will go up.
Kishida said he wants to expand the kosei nenkin program and encourage more people to join it, indicating a plan to maintain the current policy of boosting the kosei nenkin membership.
As for support for families raising children, Noda said she wants to submit to next year’s ordinary parliamentary session a bill calling for the creation of the children’s agency to be in charge of child and family issues, a move advocated by outgoing LDP President and Prime Minister Yoshihide Suga. “The state should make prior investments in children so as to tackle the problem of the falling birthrate and the aging population,” Noda said, proposing the issuance of children-related government bonds to procure necessary funds.
Kono and Kishida voiced support for the idea of establishing the children’s agency. Takaichi recognized the need to create such an agency but said it is too soon to submit a related bill.
The LDP presidential election will be held on Wednesday.
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