Table Speech

"The national social security program now being planned by the Koizumi Cabinet"

April 7th, 2004

Mr. Shunsuke Watanabe
The editorial staff of the Japan Economic Journal

Mr. Shunsuke Watanabe, a member of the editorial staff of the Japan Economic Journal, spoke at the meeting of April 7 on the reforms of the national social security program now being planned by the Koizumi Cabinet: According to the most recent data, the cost of our social security program for 2001 was 81.4 trillion yen. As our national budget is 82 trillion yen, it is almost equal to this sum.
Of this total, 20 trillion yen comes from our general budget, and 60 trillion yen from what the people have paid as pension, and other insurance fees.
Of the 82 trillion yen, 42 trillion (52.3%) is used for pensions, and 26 trillion yen (32.7%) for medical services. This leaves only 12 trillion yen for caring for the aged and handicapped and other social services.
This shows how heavily our social welfare funds are being used for pensions and medical services. In the past, social security meant funds which were allocated to look after the destitute. One reason why Japan, in spite of its large expenditure is not considered to be a welfare state is the fact mentioned above.
30 years ago, pensions for the aged were only 32.9% of the total and the remainder being spent for aid to the handicapped, the destitute, fatherless families and child welfare.
The Koizumi Cabinet has given 3 reasons for the need of reform.
The first is that of finance, the second, providing a wider choice of medical care, and the third, the fostering of the growth of the welfare and medical industry.
Regarding finance, the national income is 370 trillion yen, and 81 trillion is 22% of this amount. We have 24 million aged, and the number increases every year. The number will be 42 million 30 years hence.
According to our welfare Ministry, the cost of social security 20 years from now will reach 176 trillion yen. With the national income being 560 trillion at that stage it will be 31.5% of the total.
Thus, there is an urgent need to reduce the cost of pensions and medical services.
Increasing the scope of medical services may result in decreasing costs by offering the public a wider choice of treatment.
On the third point, current rules and regulations have a strangle hold on new initiatives, hindering free competition in the medical and social welfare field. By allowing other corporations to enter this field, economic growth can be stimulated by free competition.
The government schedule is to carry out pension reform in 2004, aged care insurance in 2005, and medical reform in 2006.
There are 34 million persons who are members of welfare pensions and receive payment of 230,000 yen per month which is equal to 59% of the average male’s salary. If this sum is maintained, the monthly fee for same will reach 26.2% from the current 13.58%.
The birth rate is down to 1.32 and it is said will only recover to 1.39.
According to our National Population Institute, by 2050, our natural life span for males will be 81 and for females, almost 90.
Care taking insurance is paid by persons over 40 years of age, but the welfare Ministry plans to tax all persons over 20.
Medical reform is matter of great urgency, and there are two keywords:
1. Restructuring of finances
2. 2. Patient-centered medical service.
Our medical services are the best in the world, but they are not patient-centered.
We are caught in a dilemma where we raised our pension fees and insurance costs without raising taxes, but there is a limit to what can be done. Therefore, there has been discussion on raising our consumer tax.
This is an issue that concerns us all, and one which there is no escape. We must all think seriously on how our social security system should be.