After a lengthy political tug of war, the Liberal Democratic Party and New Komeito agreed Tuesday night that public pension premiums paid by the average salaried worker should be raised to 18.35 percent of annual income from the current 13.58 percent.
The two coalition parties also agreed that benefits should be lowered from the current 59 percent to no less than 50 percent of the average wage.
Premiums paid into the "kosei nenkin" pension for salaried workers will be raised gradually to reach the end goal by 2017, starting next year with a hike of 0.354 percentage points every year, the ruling lawmakers said.
The average model household is made up of a husband who will keep working for 40 years and a housewife.
The decision is part of ongoing policy talks to save the ailing public pension system, which is suffering from a massive exodus of participants even though the system is designed to cover all residents of Japan.
"If we leave the current pension system untouched, it could collapse in the next two decades," said Yoshinori Ono, an LDP lawmaker who chairs the coalition's special panel on pension reform issues.
He also stressed that the "tough decision" was taken to rebuild "stable and reassuring pension system."
After long arguments between the political parties, the premium level was decided so that benefits never fall below the symbolic level of 50 percent of average income, Ono said.