To prevent a collapse of the national pension system amid the aging population and falling birthrate, the government should cut back on benefits for current and future pensioners before baby boomers retire in the next decade, an advisory panel to the finance minister said Wednesday.
The proposal by the Fiscal System Council is part of an advisory report to the Finance Ministry for the budget-making process for fiscal 2004. It was submitted to Finance Minister Sadakazu Tanigaki.
"The government needs to start limiting the level of pension benefits before baby boomers start to receive them," the council said. "Also, it needs to lower benefits for current pensioners within a rational range."
After the baby boomers, now in their mid-50s, retire, financial burdens on the pension system are expected to surge unless systemic reform is implemented.
The council stressed in its report the importance of speeding up reforms of national government tax grants to local governments at a time when the national government is racking up higher budget deficits than local governments.
With these factors in mind, the council is urging the government to keep general expenditures, or policy-related spending, lower next year than this year. It said the government should limit issuance of government bonds as much as possible.
The fiscal deficit has already reached 450 trillion yen as a result of the long economic downturn.
Funding for social security services -- pensions, medical care, care for the aged, and other welfare -- accounts for about 40 percent of general expenditures.
"How to limit social security expenses is the highest priority in reviewing the country's fiscal structure," the report says.
In compiling the fiscal 2004 budget, the government should not allow an increase in social security spending, which is set to rise naturally given the aging population, the council said.