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National pension system collapsing as corruption spreads

Japan Today

August 11, 2003

Since Japan's Social Insurance Agency took over the task of collecting national pension insurance premiums in April of last year, its account receivable has increased by 200 billion yen.

The national pension insurance fund is now facing a dangerous financial crisis.

The bureaucrats do not seem to be aware of the seriousness of the situation. They seem to believe that they can resolve the problem simply by increasing the age at which people are entitled to receive pensions and decreasing pension payments. Also, the bureaucrats are contemplating raising the nation's pension insurance premiums.

It is becoming clear that they will implement all of these measures, which will lead to further reductions in pension benefits. Furthermore, these bureaucrats are using pension money to entertain themselves.

Japan's national pension system (equivalent to the Social Security System in the U.S.) is reviewed every five years. The next review is scheduled for 2004 and necessary revisions will be made.

Higher pension premiums expected

Shogo Kitamura, an expert in pension plans, said, "The overhaul of the national pension system next year will be the worst." He predicts that the nation will have to pay higher pension premiums — 15,000 yen more each year; pension payments by the government will decrease by 45,000 yen each year; pension benefits will be as low as welfare payments to the poor; and spouses of salaried people will be required to pay pension premiums as well.

The government decides the amount of the nation's pension insurance premium based on the estimated population for the next five years. The government focuses on the ratio between older generations and the working population. The Ministry of Health, Welfare and Labor (MHWL) will use the same method for its review this time.

Currently, workers have to pay 13.58% of their annual income. During the review done in 2000, the MHWL announced that premium payments would have to be increased to 19.8% in 2025 in order to keep the system healthy. However, the ministry has found that this was too optimistic. Based on the latest population data, the ministry estimates that it should be raised to 22.4% in 2025, and if Japanese families continue to have fewer children, it will have to be raised to 24.8%.

If the MHWL's estimate is correct, Japanese salaried people will have to pay one fourth of their annual income into the government pension system.

Under the Japanese employment system, employers and employees share the insurance premium payment on a 50-50 basis. However, employers pay for it from their labor expense account, which means that employees are actually paying.

Employers also deduct income tax, national health insurance premium and unemployment insurance premiums from their employees' salaries, which wipes out about half of their salaries.

Under the current system, the more insurance premiums salaried people pay, the more pension they get from the government. If one's salary is 10 million yen at retirement, he will get 3.35 million yen pension from the government.

Finance Minister Masajuro Shiokawa said: "The idea that the government guarantees the income that Japanese citizens receive when they are still working must be discarded. They have to consider their minimum level of living. I think that pension payments by the government would be enough at a level slightly higher than that provided for poor families."

Premium payment up to 70

In April of last year, the government raised the eligible age for paying the old-age pension insurance premium to 70 years. The new act requires Japanese salaried people to pay pension insurance premiums up to 70 years old as long as they work.

Kitamura said, "So far, the government has been aiming at raising the age to 65 years old to be eligible for national pension benefits from the government. Japanese salaried people do not have to pay pension insurance premiums when they hit 65 years old even if they are still working,

"The reason why the MHWL raised the requirement for paying the old-age pension premium to 70 years was its intention to assume that the retirement age will increase to 70. However, most Japanese corporations have set the retirement age of their employees at 60. Therefore, the government's intent is nothing but an effort to delay the age of eligibility."

In 2000, the government raised the eligibility age from 60 to 65. The new rule also gives workers a choice to receive partial pension payments from the age of 60.

Tales of corruption

There was a man who often delivered cash and gifts to the Tokyo municipal government offices. When he visited those offices, he normally dropped by the offices of directors and section chiefs. He said to them, "This is the stuff as usual," and gave a white envelope to each of them.

The government bureaucrats said, "Thank you,' and some of them simply left the envelopes on their desks and others quickly put them into their pockets.

The envelopes contained an invitation to a dinner party as well as 30,000 yen cash.

The cash delivery man is Tomohisa Ogawa, the former managing director of the Tokyo Small Computer Software Industry Health Insurance Cooperative.

According to Ogawa, "The 30,000 yen was for their own use and the invitation was for their own parties celebrating year-end, summer or welcoming and farewell to their colleagues. My visits to their offices were so often that I cannot recall how many times I was there."

The offices where Ogawa visited included the Social Insurance Guidance and Management Departments of the Welfare Bureau of the Tokyo metropolitan government. The directors and section chiefs were bona fide central government employees because they belonged to the National Social Insurance Agency. Ogawa himself came from the Agency.

The National Social Insurance Agency is attached to the Ministry of Health, Welfare and Labor and is engaged in collecting premium payments for the national pension and welfare pension as well as the national health insurance.

All the bureaucrats who received gifts from Ogawa were the bureaucrats involved in these national social security systems.

Ogawa said, "Our cooperative needed to receive permission from the Insurance Guidance Department when we received an application from a corporation to become a member of our health insurance program. The members of our cooperative were increasing by almost 10,000 every year and the number of applications was enormous. In order to get them approved by the Insurance Guidance Department, it was very important for us to be in good standing with the government offices."

Ogawa added: "The instructions for entertaining the government bureaucrats came from our senior managing director. He specified luxury restaurants in downtown Tokyo to entertain them. Also, I was instructed to give them money for limousine services. The cost of dinner was usually from 15,000 yen to 20,000 yen per person. When I took them to extremely luxurious Japanese restaurants, I had geisha girls to entertain them based on their request."

Luxury entertainment

Ogawa has records of the entertainment provided to the bureaucrats.

One typical example is the entertainment on June 29, 1999. The senior managing director of his cooperative invited a section chief and deputy section chief of the Welfare Bureau to dinner at a luxurious Chinese restaurant.

Ogawa had to attend such dinner parties many times.

On July 23, 1998, two parties were held at luxury Chinese restaurants. One dinner party had 13 bureaucrats as guests and the other luxury party had 17 guests.

The guests included bureaucrats from the Tokyo Metropolitan Welfare Bureau and the Ministry of Health, Welfare and Labor. They had a 15,000 yen dinner course per head and nine entertainment female companions, costing 500,000 yen.

Last February, based on Ogawa's whistle-blowing testimony, the Social Insurance Agency conducted its own investigation and punished 13 employees behind the scenes. However, the punishment was light. The heaviest punishment was simply disciplinary punishment. Others were reprimanded by letters or warned orally.

The section chief and deputy section chief who were entertained in 1999 had had such luxury entertainment many times. The Agency decided to cut their salaries as punishment; however, at that point, they had already left the Agency. They received the full amount of their retirement payment.

These two bureaucrats moved to health insurance cooperatives after their retirement. Now they are on the side of entertaining the bureaucrats.

Last April, the government announced that it would raise the amount of health insurance premium of the salaried people from 20 to 30%. The MHWL attributed the increase to the financial deterioration of the national health insurance. But, the truth may be due to the bureaucrats' spending on entertainment for themselves.