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Policy Proposals  Economic Policy, Social Security Proposal for Reshaping the Social Security System

November 20, 2012



Japan's social security system has thus far been operated with a focus on social insurance premiums paid by both employers and employees based on universal health insurance. With unrelenting birthrate declines and rapid increases of the elderly population, however, Japan faces a situation where the sustainability of the system is jeopardized.

In order to cure this situation, the ruling Democratic Party of Japan and two main opposition parties (the Liberal Democratic Party and New Komeito) have agreed upon the reform involving a rise in the consumption tax from the current rate of 5% to 10% by 2015 in stages for stable social security funding, and in August this year, related legislature was enacted by the Diet. However, no consensus has been reached over the social security system reform including public pensions and elderly healthcare, which must be compatible with changes in social conditions. These issues have been postponed until August next year.

Based on the standpoint of maintaining the economic vitality, Keidanren emphasizes the necessity of streamlining and prioritizing social security benefits as well as restraining the burden of social security premiums on the current working generation. There is a concern that even if consumption tax rate is raised to 10%, social insurance premiums burden will become heavier (e.g. approximately 250,000 yen per worker's household and about 12 trillion yen in total for employers by FY 2025.) Such a burden would impose negative impacts on household budgets as well as reduce Japan's business competitiveness.

Then, Keidanren presented several concrete measures for streamlining and prioritization of benefits as follows: 1) Promotion of generic drug usage, 2) Review of the coverage of health insurance, 3) Moderation of nursing care insurance benefits which are considered too generous in comparison with other developed countries, and 4) Keeping down public pension benefits.

Furthermore, as regards to holding the burden of social insurance premiums in check, it is needed to reinforce the medical and nursing care system for elderly by injecting more tax revenue. At the same time, Keidanren requested the early realization of the social security and tax number system, which would provide the foundation for a more fair and equal social security system.

Economic Policy, Social Security