The government is now paying for 50 percent of basic pension benefits, but on Nov. 29 the Finance Ministry proposed reducing the government portion to 36.5 percent — the level that stood until two years ago — in fiscal 2011 because of a revenue shortage in the general account budget. It proposes using part of the ¥128 trillion reserve fund in the pension special account to make up the difference. Some ¥2.5 trillion was needed in raising the government portion from 36.5 percent to 50 percent.
The ministry's idea is that after making up the difference with money from the reserve fund in fiscal 2011, the government will raise the consumption tax rate and then raise its portion to 50 percent of the pension benefits in and after fiscal 2012. The ministry promises to return the money used from the reserve fund to the pension special account.
The welfare ministry, which administers the special account, is strongly opposed to the Finance Ministry's idea because the latter has failed to live up to a similar past promise. From fiscal 1994 to fiscal 1998, the Finance Ministry used ¥3 trillion from the same reserve fund due to a bad financial situation, yet it has not yet returned the money to the special account.