As the only country in the world to have entered a "super-aged society", Japan has introduced—or is preparing to introduce—a series of regulations and policies this year to cut fiscal spending on the elderly, in response to the labor shortages and fiscal difficulties brought by the "silver-haired society".
On September 12, a report compiled by an expert panel established by the Japanese government recommended postponing the age at which elderly people may choose to start receiving pensions from the current maximum of 70 to 75. Japan's parliament also amended the Long-Term Care Insurance-related laws this year (long-term care refers to looking after vulnerable people who cannot take care of themselves, including elderly people who cannot live fully independently). As a result, starting from August 2018, when high-income elderly people receive long-term care insurance services, their personal share of costs will rise from the current 20% to 30%. In addition, the Japanese government is discussing a so-called "flagship" policy to encourage people over 65 to continue working after retirement.
Pension claiming age postponed to 75
According to Japanese media reports, on September 12, the expert panel under the Cabinet Office that discusses social construction in the era of population aging compiled a recommendation report to the government, suggesting a further postponement of the age at which pensions can be claimed.
Japan's current pension system stipulates that pensions should in principle begin at age 65, but allows individuals to freely choose to start receiving pensions between the ages of 60 and 70. Those who choose to start between 60 and 65 receive less than the base amount (reduced by up to 30%); those who choose to start between 65 and 70 can receive an increase of up to 42% on top of the base amount.
Japan's aging problem has become increasingly serious in recent years. One obvious effect of this problem in real life is that more and more elderly people choose to continue working after retirement. The expert panel's recommendation report, addressing this reality, advocates further postponing the age at which one can choose to start receiving a pension.
Although the report does not specify an exact age, at an expert meeting in July one member proposed postponing the latest pension claiming age to 75.
Next, the expert panel's recommendation report may be written into the "Outline of Measures for an Aging Society", the guiding document the Japanese government is formulating to cope with an aging society.
However, some analysts believe that although the panel's report recommends postponing the age at which the elderly may choose to receive pensions from the current maximum of 70 to 75, its final implementation will be very difficult.
As early as 2014, then Minister of Health, Labour and Welfare Norihisa Tamura proposed delaying the pension claiming age to 75, but the suggestion was never put into actual discussion because of the enormous difficulty of implementation.
Japanese government statistics show that among elderly people who began receiving pensions in 2015, the proportion who postponed claiming until after age 65 was only 1.4%. This figure shows that, although the elderly as a group have savings above the social average, the vast majority still depend on pensions to live because of severe wealth polarization among the elderly.
Therefore, there is very little practical room to further delay the pension claiming age.
Raising the elderly's co-payment ratio for insurance
While preparing to postpone the pension claiming age, the Japanese government is also cutting fiscal spending on the elderly.
Under the amendments to the Long-Term Care Insurance-related laws previously passed by parliament, from August 2018, when high-income elderly people receive long-term care insurance services, their personal share of costs will rise from the current 20% to 30%.
When the Long-Term Care Insurance-related laws first took effect in April 2000, elderly people over 65 receiving care services paid only 10% of the required costs themselves, with the remaining 90% covered by long-term care insurance. Moreover, those assessed by the government as being in extremely poor physical or mental condition could receive insurance payments of up to more than 350,000 yen.
Since then, the Japanese government raised the personal share of care service costs to 20% in 2015 for people over 65 with annual income above 2.8 million yen, and then legislated in 2017 to raise the personal share to 30% for single elderly people with annual income above 3.44 million yen and elderly couples with combined income above 4.63 million yen.
According to statistics from the Ministry of Health, Labour and Welfare, after the amended Long-Term Care Insurance-related laws formally take effect in August 2018, about 3% of those over 65 receiving care services—that is, about 120,000 elderly people—will bear a personal share of 30% of care service costs.
At the same time, after the new rules take effect, the Japanese government will be able to save about 10 billion yen from annual care payment costs of up to 10 trillion yen.
Although the Japanese government says raising high-income elderly people's personal share of care costs is intended to cope with fiscal difficulties and ensure the system's sustainability, opposition parties have criticized the move for increasing the burden on elderly people who need care services and their families, and in particular have called the successive legal amendments in 2015 and 2017 to raise personal co-payment ratios over-hasty.
Encouraging people over 65 to work
According to World Health Organization criteria, a society in which people over 65 account for more than 14% of the total population is an "aged society", and above 21% can be defined as a "super-aged society". Japan crossed the 21% red line in 2007 and is currently the only country in the world to have entered a "super-aged society".
In this "super-aged society", labor shortage is also one of the urgent problems the government must solve. Recently, the Japanese government has been discussing a so-called "flagship" policy—work-style reform—that is, encouraging people over 65 to continue working after retirement.
This is considered one of the important means of solving Japan's labor shortage.
Projections released by Japan's National Institute of Population and Social Security Research show that by 2060, Japan's working-age population aged 15 to 64 will fall to 44.18 million, while the number of people over 65 will approach 40 million. Encouraging people over 65 to continue working after retirement appears to have become an "inevitable option" for the Japanese government.
Policies the Japanese government is considering or has already introduced tend to encourage the employment of people over 65—for example, subsidies for companies that extend the retirement age to 65, and employment assistance for people over 65 who still wish to keep working—so as to promote continued work by the elderly.
Prospects for implementation of the various plans are not optimistic
In Japanese society, the number of people over 65 is 34.61 million, accounting for 27.3% of the total population (according to the Ministry of Internal Affairs and Communications' 2016 report "Statistical Profile of Japan's Elderly"). The average savings of households headed by people over 65 is 24.99 million yen, 1.4 times the Japanese social average; coupled with the fact that more than 90% of elderly people own property, the household assets of those over 65 account for more than 60% of all Japanese society. It can be said that the elderly are the wealthy group in Japanese society.
To escape deflation, the Abe government has adopted large-scale monetary easing policies in recent years in an attempt to stimulate corporate investment and private consumption. Judging from actual results, however, although corporate profits and the public's financial asset income have increased in the short term, Japan's saturated domestic market and aging demographic structure have not changed; not only is the goal of escaping deflation a long way off, but the sharp rise in government debt has instead aggravated fiscal risks.
As a result, the Japanese government is trying every means to increase revenue and reduce expenditure fiscally, and some policies introduced for this purpose have made the elderly a heavily affected group.
The measures being prepared or already introduced all reflect that the Japanese government has begun targeting the elderly's wallets to alleviate increasingly strained finances, but the prospects for implementing the various plans do not seem optimistic.
In addition, a proposal recently championed by Japanese political star and current LDP Deputy Secretary-General Shinjiro Koizumi—requiring the wealthy to give up their pensions to fund "children's insurance"—has also met collective opposition from economic organizations. Keidanren Chairman Sadayuki Sakakibara said at a press conference on September 11 that he had received Koizumi's proposal but had also made clear to him that the business community finds it difficult to accept, reasoning that using pensions returned by the wealthy as a funding source would have limited effect.
Besides the operability problems of the above policies, the enormous influence of the elderly on Japanese politics is also a problem the government must overcome when scheming to tap the elderly's wallets. In Japan, where one in four people is over 65, the elderly have a large say in Japanese politics because of their numbers and their general interest in politics, while young people stay away from politics.
Next, if the Japanese government really intends to tap the elderly's wallets, the impact on elections will likely be an unavoidable issue.
Source: Legal Daily—Legal Network 2017-09-18