Social Security Reforms: Deepen Debate on Issues, Including Tax System

Editorial

15:27 JST, February 20, 2025

The proposals for social security system reforms that the government aims to achieve in the current Diet session are being set back due to opposition from various quarters.

In the face of an unstoppable population decline, how to maintain the pension and medical care systems and turn around the low birth rate are important issues that Japanese society cannot avoid. It is necessary to deepen debate on these issues from a comprehensive perspective.

Regarding the public pension system, the problem is the deteriorating fiscal condition of the basic (national) pension program, the “first tier” of the system, in which all people aged 20 and older are enrolled.

The government’s proposal is to inject part of the reserve funds of the employees’ pension program, the “second tier” of the system, in which salaried workers and others are enrolled, into the basic pension program.

In response, voices were raised against the proposal from various quarters, including the ruling Liberal Democratic Party, saying that if the reserve funds of the employees’ pension program are used to support the national pension finances for the self-employed and others, company employees and others would oppose the move.

In addition, the government plans to abolish the current eligibility requirement for the employees’ pension program that applies to corporations with 51 employees or more, and to make it mandatory for all the companies to join the program. However, small and midsize business organizations and other entities, which will bear the new burden of insurance premiums, are strongly opposing this plan.

Many businesses will not be able to operate if even small firms are required to pay the insurance premiums. It is not surprising that some criticize the government’s reforms as being too aggressive.

The government is working to postpone the timing of the implementation of any of the reforms and deciding whether to implement them.

Meanwhile, in the area of medical care, the government has presented a policy of gradually raising the maximum amount of co-payments for patients under the high-cost medical expense benefit system, which sets a ceiling on medical expenses that are borne by patients. However, the move has been criticized by patients’ organizations and other entities because the maximum amount will be increased by more than 70% depending on the annual income of patients.

The revision of the system was proposed partly with the aim of raising funds for measures against the low birth rate. Such measures are focused on the expansion of child allowances.

The previous administration attempted to take the position of “measures to deal with the low birth rate without tax increases,” as it judged that there would be strong opposition to an increase of consumption and other taxes. As a result, the government decided to finance the measures by cutting social security spending and increasing insurance premiums.

The fact that the government has avoided discussions about the tax system may have led to various distortions.

In the Diet session, the focus is on how far the administration of Prime Minister Shigeru Ishiba will go to accept the opposition parties’ demands, including free high school education, leaving aside reforms that would increase burdens on the public.

It is worrisome if the government is focused solely on remaining in power by gaining the cooperation of the opposition parties, and therefore it turns its eyes from reforms that are basically indispensable.

(From The Yomiuri Shimbun, Feb. 20, 2025)