Mushrooming Costs of Japan's Aging Population
By: Miki Tanikawa
TOKYO, Dec. 25 — When the Finance Ministry published the first detailed report of Japan's finances in October, it was part of an attempt to put a fresh face of honesty on government accounting. But the main theme that emerged from the data was how quickly Japan is growing old.
The balance sheet, as the Finance Ministry called it, portrayed a country burdened with heavy liabilities, most notably a sharp increase in pension payments as increased numbers of workers retire.
The total public assets of 659 trillion yen, or about $6 trillion, failed to meet the liabilities by a large margin under the realistic assessment of the Finance Ministry accountants. They calculated that the government faces total liabilities of 776 trillion yen, or about $7 trillion, assuming it pays all retirees what they are owed.
In many ways, the Japanese, despite their reputation as big savers, may be in even worse shape to face their nation's changing demographics than either Europeans or Americans.
It is not new, of course, that Japan's population is growing older — it has the lowest birthrate of any developed nation, almost no immigration and one of the longest-living populations, a reflection of Japan's postwar affluence. But viewed in the uncompromising arithmetic of an accountant, the aging of Japan represents a severe drag on government finance.
Toshihiro Ihori, a professor of public finance at Tokyo University, said the Finance Ministry's balance sheet reinforced a prevailing view that the value of Japan's total pension liabilities comes close to the nation's annual economic output of 500 trillion yen, or about $4.4 trillion.
The public balance sheet also tries to account for a variety of other assets and liabilities. Experts remain concerned that it does not take into account a galaxy of government- financed corporations that do everything from building roads and bridges to extending housing loans to individuals.
Many of those activities are money-losing operations, which is no surprise considering that the projects were designed with a public intent and not with profits in mind.
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