Japan's underfunded public pension system -- which was a major issue in the Nov. 9 general election -- is in need of urgent reform. As expected, the Health, Labor and Welfare Ministry's plan for 2004, unveiled Monday, calls for drastic changes that would impose a greater burden on both the younger and older generations.
The primary question is how to cover the fund shortage in order to build a sustainable system. The ministry proposes two broad methods. One is to adjust pensions to premiums, not the other way round. In other words, benefits would be provided within the limits of premium revenues. Another method is to draw down the reserves for future pension payments.
In the case of corporate employees, the premium rate -- now fixed at 13.58 percent of annual pay -- would be increased gradually to 20 percent over a period of about 20 years beginning in fiscal 2004. The rate would be fixed permanently at that maximum level. Premium payments would continue to be split equally between employees and employers.