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Terubumi Nakada, a retiree in Kasukabe, north of Tokyo, says a new law that will cut his ¥130,000 monthly pension by as much as a sixth has forced him to seek a part-time job. "There isn't any work for young people, and there definitely isn't any for people of my age," said Nakada, 62, who retired in December as a metals inspector at Kasukabe-based Nich KK, and whose pension is worth $1,182 a month. Prime Minister Junichiro Koizumi's proposal to bolster Japan's two largest pension plans by reducing payments and raising contributions may backfire on Sunday when voters choose half of the 242 lawmakers in Japan's upper house. Nakada said he would switch his allegiance and vote against Koizumi's governing Liberal Democratic Party. An opinion poll by the Nihon Keizai newspaper last week found that 65 percent of 18,965 likely voters opposed the pension changes. A Yomiuri newspaper survey of 51,365 electors last week showed the opposition Democratic Party would win the most seats. Still, the results are unlikely to overturn the dominance of the upper house by the LDP and a coalition partner, the Yomiuri survey found. The two pension plans for nongovernment workers paid out a total of ¥629 billion more than they collected in the fiscal year that ended March 2003, according to the Health Ministry, which has not released more recent results. The Keidanren, the nation's most powerful business lobby and usually a supporter of LDP policies, said pension contribution increases, approved by Parliament last month, could cut some corporations' profit by half. "Disposable income will fall for employees, which is a minus for consumption," said Hiroshi Iida, general manager of investor relations at Isetan, the fourth-largest department store chain in Japan. "Consumers are worried about their future and what will happen to their pensions, and that can cause people to save their money." Money that the government holds in reserve for pensions fell by ¥2.8 trillion, or 2 percent, in the 2002-03 fiscal year, according to the Health Ministry, which oversees pensions. Japan is the world's fastest-aging society. The number of retirees is forecast to grow 40 percent to 34 million by 2018, or 27 percent of the population, statistics from the Institute of Population and Social Security show. At the same time, the population will start to shrink by 2006 because of declining birthrates. This year there will be 3.4 people aged between 15 and 64 for every person 65 and over. In 2017, when the new pension law will be fully implemented, the ratio will fall to 2.2 to 1. The figures tend to be a "best-case scenario," said Takahiro Ogawa, a Singapore-based director at Standard Poor's. "The longer the government tries to maintain the system without having any policy measures to adjust to the current demographic situation, the heavier the shock to the nation," Ogawa said. Under the new law, employees and employers in the biggest plan must raise their total shared contributions in stages, to 18.3 percent of salaries from 13.6 percent now. Payouts will be cut to at least 50.2 percent of the average wage from about 59 percent now. Nakada, the pensioner from Kasukabe, said his savings might be exhausted in a year if he cannot find work. "Japan is famous for having huge household savings, but it's not the case with me and a lot of other people," he said. The government also must find a way to elicit what are supposed to be mandatory contributions from self-employed, unemployed and part-time workers. About 40 percent of those workers currently do not pay, according to the Health Ministry. If the law is changed so that employers have to match the payments of part-timers, it will cost 47 of the nation's supermarket companies a total of ¥21.7 billion each a year, according to the Japan Chain Store Association. The group represents retailers including Aeon and Ito-Yokado, Japan's two largest. McDonald's Holdings and 149 other food companies will have added costs of ¥25.5 billion a year, the Japan Food Service Association estimated. "There's a high possibility the government will have to raise contributions more than planned, and/or reduce payouts further, even though the reduction this time is quite significant," said Kazuhiko Nishizawa, an economist at the Japan Research Institute in Tokyo. The pension bill drew protests even as it was being debated. It was the LDP's third attempt to address pension shortfalls in the past decade. Public dismay increased when Finance Minister Sadakazu Tanigaki and some other politicians said they had neglected to make some mandatory payments into the pension system. All Japanese adults are required to contribute to at least one pension fund. Yasuo Fukuda resigned as chief cabinet spokesman after admitting he did not make some payments. The opposition leader Naoto Kan, who failed to make payments at the time he was health minister, also quit.
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