Koizumi's pension reform dilemma

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Koizumi's pension reform dilemma

The Asahi Shimbun

November 19, 2003

One group brought out the votes, the other brought out the dough. And Prime Minister Junichiro Koizumi is caught between the two.

In a nutshell, Koizumi is getting a lesson in looking after political allies-in this case, the Buddhist-oriented New Komeito on one hand, and the business world on the other.
Coalition partner New Komeito's organizational strength was a key factor behind the success of Koizumi's Liberal Democratic Party in the Nov. 9 Lower House election, while the business sector has always had deep pockets for campaign contributions.

Therein lies Koizumi's dilemma as he tries to wrap up discussions on long-overdue reform of the national pension system, which must be completed by year-end if changes to take effect in fiscal 2004 are to be included in the budget proposal submitted to the Diet in early January.

New Komeito made pension reform the core plank of its party platform in the Lower House election. For this reason, it will do everything it can to ensure a Ministry of Health, Labor and Welfare draft released Monday becomes the government's official position.

It is no mystery why proposals made by the welfare ministry and New Komeito are almost identical. Chikara Sakaguchi, the welfare minister, is a New Komeito Lower House member.

Several points of the New Komeito policy manifesto, such as keeping pension premiums under 20 percent of annual income and maintaining pension payments to between 50 percent and about 55 percent of net annual income for the average worker, mirror the ministry's proposals.

New Komeito will fight to gain approval of the welfare ministry plan since any watering down would be seen by voters as a betrayal of its policy manifesto.

On Tuesday, New Komeito and the LDP signed a policy agreement to ensure the continuation of their coalition. A key section calls for securing a stable revenue source and raising the ratio of the basic pension covered by taxpayers' money from the current one-third to one-half.

The business sector naturally is opposed to raising the pension premiums to 20 percent of a worker's annual salary since companies will be obliged to contribute half of that amount.

Seiji Murata, vice minister of economy, trade and industry, spoke on behalf of business interests Monday when he said: “Corporations are constantly being squeezed at a time of severe international competition. That element should be recognized in thinking about the level of burden to place on them.”

Heizo Takenaka, state minister in charge of economic and fiscal policy, also wants to lighten the burden on businesses and lobbied Koizumi to establish a joint deliberation organ among government and ruling coalition officials.

Takenaka has been sounding out private-sector representatives on the Council on Economic and Fiscal Policy in an effort to cap premium payments at 16 percent of a worker's annual salary.

For his part, Koizumi has been wavering on the issue.

On Oct. 28, Koizumi seemed to fall in line with the welfare ministry position, saying, “Pension payments should amount to about 50 percent (of income earned by the working population) and the limit on pension premiums (that workers shoulder) should be 10 percent of income.”

But on Monday, when asked by reporters if a minimum level of pension payments should be set at 50 percent, he said, “There must be more flexibility when considering this issue.”