The Diet has enacted the revised National Pension Law, under which more tax money will be used to cover part of the public pension's base tier. The coverage by tax money will be raised from the current 36.5 percent of the base tier to 50 percent. In view of the graying of the population and the low birth rate, the 2004 pension reform plan called for the increase to be carried out by the end of fiscal 2009 to help stabilize the public pension system.

While the ruling coalition plans to continue the current system of using both premiums and tax money to pay for the base tier, the Democratic Party of Japan proposes using tax money to cover the entire base tier. Prime Minister Taro Aso told the Diet that public discussions are necessary on the long-term future of the public pension system. The pension system will be an important issue in the coming general elections. Political parties need to present their pension reform proposals clearly and in an easy-to-understand manner.

Despite its plan to cover half the base tier with tax money, the government has been unable to find permanent revenue sources for the measure. To cover the cost for fiscal 2009-2010, the government has decided to use special reserves in the special account for fiscal investment and loans.