Cabinet ministers and ruling party executives agreed in principle Wednesday to maintain future pension levels at 50 percent or more of workers' incomes when reforming the public pension system.
Executives of the Liberal Democratic Party and New Komeito joined ministers in reaching the agreement in their first meeting on the issue at the prime minister's office, participants said.
Policymakers are currently hammering out major issues tied to pension reform, with the government scheduled to draft its budget for fiscal 2004 in late December.
The pension system is creaking under the weight of the aging society and the declining birthrate.
The question of how to strike a balance between future premiums and benefits is one of the core issues in the debate.
The LDP and New Komeito have struck a deal to keep benefits for the income-linked pension system for salaried workers -- one of the three sections of the public pension system -- at not less than 50 percent of salaries.
The plan is also in keeping with a scheme presented last month by the Health, Labor and Welfare Ministry.
Under the ministry's proposal, benefit levels will fall from the current 59.4 percent of workers' income -- but will be kept at 50 percent or more even if economic activity and the birthrate falls below government estimates.
The ministry also proposed that the pension premium, which is equivalent to 13.58 percent of salary and is split equally between workers and employers, should be increased gradually to 20 percent by fiscal 2022.
Now that an agreement has been reached on benefit levels, policymakers will need to work out other sticking points, officials said.
These include the premium levels for the employee pension system and the means of generating funds needed for raising the government's contribution to the basic pension program from one-third to half.