Ruling, Opposition Parties Agree on Pension Bills: Even If System Reform Is Carried out, 5 Years from Now Is Too Long

Editorial

15:11 JST, May 28, 2025

It is praiseworthy that the ruling and opposition parties have reached a consensus regarding reform of the public pension system. However, they intend to decide whether to put the reforms into action in five years.

Can the stability of the system be maintained with such a leisurely approach? The ruling and opposition parties must not shy away from discussions on increasing the burden on the public, including a review of the tax system.

The leaders of the Liberal Democratic Party, Komeito and the Constitutional Democratic Party of Japan met and agreed to revise bills related to pension reform. The bills are expected to be passed in the current Diet session.

There are two revisions, both of which will be clearly stated in the supplementary provisions of the bills.

The first revision states that “legislative measures will be taken” if a financial verification of pension, to be conducted in 2029, indicates a decline in the benefit level of the basic pension program, which is the first tier of the public pension system.

Specifically, the benefit level will be raised by utilizing part of the reserve funds of the employees’ pension program — the second tier of the public pension system — for the basic pension program. A legal revision for that purpose is envisioned for 2030.

Regarding the second revision, the bills also stipulate that the government will mitigate the impact of the reduction if the benefit level of the employees’ pension program decreases due to the use of the reserve funds.

In its financial verification of pension last year, the government announced its estimation that if no reforms are implemented, the level of basic pension benefits will fall to about 70% of current levels in 30 years.

This is because the mechanism to control the growth of the level of pension benefits when prices rise could not be implemented under the deflationary economy, and measures for how to decrease the benefit level have not been devised.

The basic pension program is also called the national pension program. In recent years, an increasing number of nonregular workers have been receiving benefits. In the future, people in the “employment ice age generation” will also become beneficiaries.

If the full amount of the national pension benefits, currently ¥69,000 per month, were to be reduced further, it would be impossible for beneficiaries to make ends meet. It is understandable that the reserve funds under the employees’ pension program, which has some financial leeway, will be used to support the national pension program.

However, some in the LDP are wary that corporations and company employees could protest if employee pension premiums, which are split equally between labor and management, are utilized for the national pension program. For that reason, the measure to raise the benefit level of the national pension program was deleted from the initial bills.

But, as the CDPJ strongly demanded that the method of raising the benefit level be specified in the bills, the LDP changed its mind and agreed to revise the bills and revive the deletion. However, fundamentally, the LDP should have squarely explained what the burdens involved in raising the benefits should be like and gain the understanding of the public.

The pension system is based on intergenerational support. However, as the population of working-age generations declines due to low birth rates, it is also important for those who can afford to live comfortably to be the supporters, along with intergenerational support.

To actually raise the benefit level of the basic pension program, new financial resources of about ¥2 trillion per year will be required. It will be impossible to rule out raising consumption tax rates as an option.

(From The Yomiuri Shimbun, May 28, 2025)