November 12, 2019
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Pensions reform: A reviled subject for Japan's Abe government

 Japanese Prime Minister Shinzo Abe speaks at a press conference after a meeting with Italian Prime Minister Giuseppe Conte at Chigi Palace in Rome, Italy, Apr. 24, 2019. EPA-EFE FILE/ETTORE FERRARI

Japanese Prime Minister Shinzo Abe speaks at a press conference after a meeting with Italian Prime Minister Giuseppe Conte at Chigi Palace in Rome, Italy, Apr. 24, 2019. EPA-EFE FILE/ETTORE FERRARI

By Antonio Hermosin Gandul.

Tokyo, Jun 24 (efe-epa).- The future of pensions in Japan is an old headache for the government, but citizens’ concerns over the issue are soaring as the country faces fresh elections and growing economic challenges.

Japan's rapidly aging population and its huge public debt are raising doubts about the viability of the national pensions scheme, although Prime Minister Shinzo Abe’s government has for now shelved all discussion regarding the need for reforms.

The issue came up after a controversial government report earlier this month underscored the unsustainability of the situation, leading to a wave of popular indignation just weeks ahead of the House of Councillors (upper house) election on July 21.

The report, prepared by the Financial Services Agency, said that a couple that retires at the age of 65 in the coming years would need personal savings of 20 million yen (around $186,000) to supplement their pensions if they are to look after themselves till the age of 95.

Faced with a barrage of negative reactions from citizens and the opposition, as well as from within the ranks of the ruling Liberal Democratic Party (LDP), the government decided to discard the report, which was initially aimed at encouraging private savings with an eye to retirement.

Around the middle of the month, some 2,000 people marched on the streets of Tokyo in what was a gathering called by citizens through social networks. Similar demonstrations have been planned for the coming days.

The opposition termed the withdrawal of the report as unprecedented and outrageous, and accused the government of trying to hide information. On Friday, it presented a no-confidence motion against Finance Minister Taro Aso, which did not succeed.

When questioned about the issue in parliament, Abe said the report was erroneous and that the government was doing everything possible to reform the pension system to ensure sustainability.

"The findings of the report are real," economist Takahashi Oshio told EFE, terming the government's decision to withdraw the report and postpone all public discussion on the issue until after the elections as senseless.

Abe's party is "extremely nervous" over the issue because "it does not want to repeat the failures of the previous government" and also because of the imminent implementation of another controversial measure which would also affect the pockets of the Japanese - a VAT hike scheduled for October, said Oshio, a professor of public finance at the Hitotsubashi University and researcher at RIETI think tank.

During Abe's brief first term (Sep. 2006 to Sep. 2007), the LDP suffered a painful defeat in the upper house elections that left the conservative party in a minority for the first time in 52 years, following a scandal related to mismanagement of public pensions.

It remains to be seen if the matter will return to haunt Abe's party, which currently enjoys an overwhelming majority in both houses of parliament against a weak and divided opposition.

It is apparent that reforms are required in Japan in this regard, as pointed out by international organizations such as the Organisation for Economic Co-operation and Development, which in a 2017 report singled out the country for keeping its retirement age below 66 years of age, which is the lowest among this group of nations.

Currently, the retirement age in Japan is 65 years, and the average pension reaches 150,000 yen. Nearly 20 percent of Japanese people over 65 are in a situation of relative poverty, among the highest of developed countries, according to OECD data.

Japan also has among the highest dependency ratios in the world with 1.8 people of working age for every retired person, according to a recent United Nations report.

The situation is expected to worsen given low birth rates and increased life expectancy in the country, where 40 percent of the population is expected to be over 65 by 2060.

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