Pension Funding Expansion Faces Delay

By Kazuaki Nagata, The Japan Times

December 5, 2008

Japan

The increase in the state's funding of the basic pension system to half from one-third doesn't necessarily have to happen next April, Prime Minister Taro Aso said Thursday, indicating the hike will probably be delayed.

On Thursday, Health, Labor and Welfare Minister Yoichi Masuzoe reportedly met Finance Minister Shoichi Nakagawa to request that the government stay on schedule.

Aso said when he took office that he would carry out the funding expansion in April 2009. But when he was asked Thursday whether he is still on the same page as Masuzoe, Aso said he was not particular about staying on schedule.

"It all has to do with the financing as well. I think the promise was to do it during fiscal 2009," Aso told reporters.

With the elderly population growing and funding for pension benefits shrinking, the Pension Law was revised in 2004 to increase the government's share of funding for the basic pension system to half from one-third, on the assumption that a stable source of financing could be secured.

About ¥2.3 trillion a year is needed to fund the pension system, and many lawmakers were thinking of raising the consumption tax to fund the jump in the government's pension burden.

But Aso has said he won't raise taxes until the economy has fully recovered.

"The shift to half from one-third was decided quite a while ago," Aso said. "I think we're still discussing which financial resources will be the most appropriate."

There have been calls from many quarters to raise the 5 percent consumption tax to fund the rising social security costs, but with the economy tanking and an election looming, the hike has been put on hold.

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