Social Security
In
Japan

２００７

Preface
This booklet aims to provide foreign researchers with an introductory
explanation of aspects of the social security system in Japan: pensions,health insurance, public assistance, long-term care and employment
insurance. The booklet was first published in March 2000, and this is
the fourth version updated for 2007.

The booklet is mostly

descriptive and kept at a minimum level in outlining the current
system and the challenges facing it.

Researchers who wish to learn

more are advised to refer to homepages of related agencies (mostnotably that of the Ministry of Health, Labor and Welfare and theInstitute of Population and Social Security Research).

As Japan’ssocial security system is undergoing a series of reforms, we will update
this publication from time to time.

Dr. Takanobu Kyogoku
Director-General
National Institute of Population and Social Security ResearchContents

1.

Overview of Social Security System22.

Pensions

6

Outline of Pension System

3.

Health Insurance

18

Outline of Health Insurance System

4.

Social Assistance28

5.

Long-Term Care

38

6.

Employment Insurance

42

Outline of Employment Insurance System

For More Information48

Chapter 1
Overview of Social Security System
I. General Characteristics

1. Social security
As with other countries, the source of social security in Japan could be found incharity-oriented communal activities for the poor in a pre-modern era.

In the modern

era, while legislations such as Indigent Person’s Relief Regulation (1874) and Poor Relief

Law (1932) 1 were enacted, the modern social security system based on the state’s
responsibility in sharing and mitigating social risk of the population did not start until
after the World War II with the inclusion in the Constitution of the Article 25:“(1) All people shall have the right to maintain the minimum standards ofwholesome and cultured living. (2)The State must make efforts to promoteand expand social welfare, social security and public health services to cover
every aspect of the life of the people”.
Starting with the urgent need to relieve the war-stricken people, the system of “social
security” has gradually extended its reach.

The term “social security” means in Japan arange of social policy that is the task of a welfare state, from income security to the publichealth. Table 1.1 shows the list of major schemes defined as social security in Japan.
The main organ responsible for overseeing and carrying out these schemes is the
Ministry of Health, Labour and Welfare (MHLW). .

2. Universal health insurance and universal pension
The year 1961 was memorable in the history of Japanese social security. Two laws
for universal health insurance and pension were enacted in 1958 and 1959, respectively,
and enforced in 1961.
system.

Law

They have become the two main pillars of Japanese social security

Together with the Public Assistance Law (1946) and the Employment Insurance(1974), they are the main institutions of social policy to mitigate the risk ofsickness, accidents, unemployment and old age.

1 The English names of law and schemes are in consistent with official documents, in order to avoid
the confusion.

2

Table 1.1

Schemes of Social Security

Health insuranceManagement of health care delivery system
Prevention of diseases such as TB, AIDS and cancer
Long-term care insurance
Public pension(Public assistance)*
Income assistance
Services for the elderly(Welfare for the elderly)*
Assistance for the disabled(Welfare for the disabled)*
Benefits for children(Welfare for children)*Public health
Employment insurance
Work-related accident insurance* Terms in italics are official ones used by the government

3. Social insurance and tax
Social security systems such as those for health care, long-term care, public pension,
employment and work-related accident take the form of social insurance.

The public

insurance system provides in-cash and in-kind benefits to insured persons (and theirfamily) in case of downfalls within their life cycle. The participation for these schemes ismandatory to all citizens and their employers in case they are employed.

The

contribution to the schemes is shared by all insured, in most cases, according to theirability to pay (income). Thus, the function of social insurance is to share the risk among
insured persons, and at the same time, to redistribute income among them.
On the other hand, measures identified as social welfare, such as public assistance(meaning income maintenance for the poor, in Japan) and services and benefits for theelderly, children and the disabled are mostly paid out of the general budget of thegovernment (tax).

There is a continuing debate, especially on the pension schemes,

between those who claim converting some of the insurance-based schemes to thetax-based schemes and those who prefer to maintain the link between the contribution
and benefit through an insurance system.

3

4. In-cash and in-kind assistanceKinds of benefits provided through the social security system are either in-kind orin-cash.

Table 1.2 lists major types of benefits by in-kind/in-cash classification.

Table 1.2 Major Types of Service by In-kind or In-cash Classification
To whom
In-kindIn-cashThe sick

Health care services

The elderly

At-home services
Institutionalized services

Assistance for households which takecare of its own elderly (limited)
Old-age and survivor’s pension

The disabled
The children

The poor
The unemployed5.

Institutional service for thedisabled
Institutions for special children

Disability pension
Child allowance

Health care services
Employment services

Child rearing allowance forsingle-mothers
Livelihood (income) support
Unemployment benefits

Service providers
Service providers of social security, such as hospitals and clinics for the health care,

day-care centers and institutions for the elderly long-term care, rehabilitation centersand support centers for the disabled, and so forth, can be both public and private. For
example, there are public hospitals and private hospitals, services of which are bothcovered by the public health insurance, and from the view point of the user, there is nodifference.

They both operate under the supervision of the Ministry of Health, Labourand Welfare (MHLW) and the prefectures.

II. Revenues and Expenditure of the Social Security
Figure 1.1 shows a breakdown of social security revenue and expenditure as definedby the International Labor Organization. Insurance premium accounts for nearly 60%of the total revenue and government contributions and others for the rest.

The

expenditure for the public pension takes up nearly a half of the entire expenditure, andfor the health insurance, a little more than one third.

4

Figure 1.1

Notes:

Social Security Expenditure by revenue, scheme, category, function and target individuals, fiscal year 2004

1. “Child, family” refers to medical insurance in the form of a lump sum maternity allowance and child-rearing allowance, employment insurance
in the form of parental leave allowance, day-care facilities administration costs and single parent family and disabled child allowance.
2. Fiscal year 2004 Social Security Revenue amounted to 93.0 trillion yen (excluding transfer from other systems). The figure in square brackets[ ] represents the ratio of the Social Security Revenue total.
3. Fiscal year 2004 Social Security Expenditure amounted to 85.6 trillion yen. The figure in parentheses ( ) represents the ratio of the Social
Security Expenditure total.

Chapter 2
Pensions
I. General Characteristics
1.

Three-tiers of pension system
The Japanese pension system is multi-tiered, consisting of public and private pension

schemes (Fig.2.1). In this booklet, the distinction between public and private pensions isdefined to be whether the insurer of pensions is the government or not. The first tier is the

Basic Pension (Kiso Nenkin), which provides the flat rate basic pension of a universal
coverage. As a non-income-related pension, it aims to provide a basic income guarantee forthe old age, and the participation is mandatory to all residents.

The second tier, theEmployees’ Pension Insurance (Kose Nenkin Hoken) covers the most of employees and isincome-related in both premium and the benefit structure.

Its provision is mandatory to all

firms over a certain size, and premium is shared by employers and employees.

The first andthe second tier pensions are both operated by the government and thus are public. The
third tier is an optional scheme.

It is provided either by private firms (employers) for theiremployees, or by collective national pension funds for the self-employed for which thegovernment is the insurer. The Employees’ Pension Funds is operated by employers, but
has a large portion of the Employees’ Pension Insurance and thus has a quasi-publiccharacter.

On top of the three tiers, purely private, individual-based pensions, such as

those offered by the life insurance companies, provide the additional coverage for those whowish to purchase the plans.
The schemes in the first and the second tiers for employees are jointly operated and asingle contribution rate covers contributions for both schemes.

Thus, in many cases, theterm “Employees’ Pension Insurance” refers to both of them jointly.

The Employees’ Pension

Insurance covers both employees and their spouses (Categories No.2 and No.3 insured. See
Fig 2.1).
Similarly, the Basic Pension for the self-employed, farmers and other non-employed(Category No.1 insured) is called the National Pension(Kokumin Nenkin), which areoperated, by municipalities (and thus called regional-based pension).

The civil servants

have a separate scheme on their own called Mutual Aid Pensions, which covers both the

Basic Pension portion and the income-related portion.

Thus, the entire adult population,in principle, is insured either by the Employees’ Pension Insurance, the National Pension or6the Mutual Aid Pensions.

2.

Universality of the basic pension
The coverage of the Basic Pension is universal, i.e. it is intended to cover all residents 20

years old or above in Japan including foreigners. For the National Pension, the eligibility toreceive pension benefit requires a minimum of 25 years of premium payment.

3.

Mixture of public and private schemes
The insurer of the National Pension and the Employees’ Pension Insurance is thegovernment. They form the two pillars of Japan’s public pension system.

According to asurvey, more than 60% of the elderly households depend entirely on the public pension
benefits for their income.
Other schemes are occupational pensions.

The Employees’ Pension Funds, the Tax

Qualified Pensions and the Mutual Aid Pensions, the third tier for the Category No.2
insurers (employees), are run by each private firm or the government in the case of the
Mutual Aid Pensions where the government is the employer, and not all of the employees arecovered by them.

The National Pension Funds, which provide the third tier coverage for theCategory 1, are run by local and occupational funds. It is also optional, and only a fractionof the Category 1 is participating.

4.

Insurance premium
For the Employee’s Pension Insurance (the public pension for the Category No.2, i.e.

employees), the premium is paid by both employees and employers, and is set at a fixed rateof the salary.

The same rate covers the premium for his/her spouse who does not makemore than ¥1.3 million/year (called the Category No.3 ). For the National Pension (thepublic pension for the Category No.1, the self-employed), the premium is paid by the insured
only, and is a flat rate for all. Both the Category No.1 and his/her spouse, if he/she is notworking as employees, have to pay the premium.

The premium for occupational pensions differs from scheme to scheme, but mostly is
paid by the employers for the Category No.2 and by the insured for the Category No.1.

7

Fig. 2.1

Pension System in Japan

Corporation-BasedDefined Contribution
Pensions(paid by employers)

Individual-BasedDefinedContribution Pensions(paid by individuals)

Max.

Max.

¥68,000 –¥46,000/mo

NPF
premiumMax.

Max.
¥23,000/mo
CorporatePensions¥18,000/mo
National

MutualFunds

PensionFunds (0.8m)

Employees’ Pension Insurance

Basic Pension

Spouses of
employees(No.3)
11million

Max.
¥18,000/mo

Self-Employed(No.1)
22 million

Employees (No.2) 37 million

Shaded boxes indicate optional Defined-Contribution
pensions. The amount inside is the maximum premium.
Note: Numbers in ( ) are number of subscribers. No.1, 2, & 3 denotecategories of subscribers: No.1 is for self-employed, farmers, students,
etc., No.2 is for employees, and No.3 is for spouses of No.2.
(All numbers are as of March 2005)
Source: Kose Hakusho, MHW, 2006

8

5.

Government subsidy for the public pensions
For the first tier (Basic Pension), one half of the benefits and all of administrative costs

are paid from the general budget of the government.

For the second tier (Employees’

Pension Insurance) and mutual aid association pensions for central and local civil servants,
the administrative costs are paid by the central government. For the third tier, there is no
subsidy from the government.

6.

Mixed retirement package
Japanese firms traditionally offered to its employees a retirement allowance in the formof a one-time lump-sum payment.

Since the introduction of public pension schemes, firms

started to offer private pensions to attract employees.

Currently, most firms provide a

mixture of a lump-sum payment and a pension scheme.

Since the two types of scheme areinterchangeable in many instances, the entire retirement package is seen as the income
security for the retired.

7.

Defined –Benefit vs. Defined-Contribution Pension Schemes
The National Pension, the Employees’ Pension Insurance, and optional National Pension

Funds

and

corporate

pensionsarealldefined-benefit

schemes.

In

2001,

Defined-Contribution pension schemes were introduced. However, the number of schemes
and the enrollment has not increased as much as expected.

The number of enrollment wasaround 1.2 million persons at then of FY 2005.

9

II. Pension Schemes
1.

The National Pension
As described above, all residents in Japan between ages of 20 to 60 are eligible andrequired to become a subscriber of the Basic Pension. Whereas employees automaticallyenroll in the Basic Pension when they subscribe to the Employees’ Pension Insurance, theNational Pension is for those who are not employees. A fixed amount (¥13,860 per month in2007) is levied on each subscriber as a premium.

However, low-income persons (about

15.0% of all No.1subscribers in 2004) and non-working spouses of employees are exempt frompaying premiums, partially or entirely.

Current benefits are paid out of currently collected

premiums (pay-as-you-go system), but as much as one half of the benefits are subsidized
from the general budget of the government.

The benefit is flat rate to all, and the scheme

is a defined-benefit scheme.

F i g . 2 .2 S u b s c ri b e rs o f th e B a s i c Pe n s i o n ( 2 0 0 5 )Category 3
16%
Category 1
31%

Category 2
53%

Category 1: All residents who are not Category 2 or 3, i.e. self-employed, farmers, students, etc.
Category 2: All employed persons whose workplace has more than 5 employees
Category 3: Non-working spouses of Category 2
Source: MHW, 2006

Currently, only about 1 to 2 % of the eligible persons fail to participate in the Basic

Pension, and 96% of all persons aged 60 and over receive the Basic Pension, thus its scheme
has achieved near perfect universality.
is about ¥52,500.

10

The average monthly benefit amount for the old age

2. The Employees’ Pension Insurance
The Employees’ Pension Insurance forms the core of the income security for retirees.
All workplaces with more than 5 employees and their employers are required to participate
in this scheme. Both employers and employees contribute 7.32% 1 of employee’s monthly
salary as premiums (including a premium for the National Pension), and the pension benefit
is income-related.

There is no discount system for low-income persons/household (or his/her

employer), but employers of those who are on maternity leave (up to 1 year) are exempt frompaying premiums 2 .

However, the ceiling of the premium is set at the premium rate

multiplied by ¥620,000 (the maximum category of monthly salary). The benefits are related
to the employee’s salary. The average monthly benefit for the old age is about ¥167,500,
which amounts to 53.4% of the average monthly salary of subscribers (2004).

3.

National Pension Fund

The National Pension Fund is an optional pension for the self-employed (Category No.1),
and it is designed to give additional pension coverage to the self-employed who do not havethe second-tier pension (Employees’ Pension Insurance).

However, only about 3% (0.73

million) of Category No.1 subscribers (22 million) are currently subscribing to the Fund.

4.

Corporate pensions and retirement allowances
90% of all Japanese firms offer retirement packages for their employees.

A retirement

package can be either a one-time lump-sum retirement allowance, or a life-long or limited
duration pension, or both.

In 1997, about a half (52.5%) of firms with some kind of

retirement package offered a pension scheme, while nearly 90% provided a lump-sum
allowance.

Even though the pension is gradually spreading its share, the traditional styleof the lump-sum allowance is still the main stream and most employees choose to take a partor the entire amount of the retirement money as the lump-sum payment.

1 The premium rate applies only to monthly salary, and the premium rate for seasonal bonus payments(usually 3.5 months worth of salary) is 0.1% shared equally between employers and employees.
2 Employees who are on maternity leave typically do not receive salary, except unemployment benefits(40% of their pay), and thus do not need to pay a premium. The duration of maternity leave is counted
as insured months in calculating a benefit level.

11Fig. 2.3

Share of firms with retirement allowance scheme
and/or private pension scheme (1998)

Retirement

PrivateAllowance

Pension47.5%

11% - has neither

32.2% 20.3%
89% - has either

Source: H12 Kigyo Nenkin Hakusho

There are two types of corporate pension schemes: defined-benefit pension schemes anddefined-contribution pension schemes. Among the defined-benefit pension schemes are the

Employees’ Pension Fund and the Tax (Exempt) Qualified Pension (scheduled to be phasedout).

The newly introduced defined-contribution schemes offer an attractive choice for

employers and employees seeking flexibility.

5.

Defined-Contribution pension schemes
The defined-contribution (DC) pension schemes have two types: individual-based andcorporation-based.

The individual-based defined-contribution scheme is for self-employedpersons (Category 1 subscribers) and is designed to give optional pension coverage to theself-employed.

It is operated by the National Pension Fund Association, and its premium is

paid by the subscribers themselves. The second type of the defined-contribution pension
schemes, the corporation-based DC pension, is a type of corporate pensions. Corporations
may provide this type of pensions to its employees.

The premium is entirely borne by theemployer.
Firms welcomed the introduction of DC schemes and many corporations have shifted fromthe Defined-benefit (DB) corporation pension to the DC corporate pension.

This is because

firms are realizing a huge burden of future pension payments, which is now labeled asliabilities under the new accounting system.

Suffering from low-returns on their funds,

firms are eager to convert their DB pension schemes to DC schemes, in which future
payments are related to the investment performance of funds, as opposed to the current
system in which future payments are fixed at the beginning.
Another motivation behind the introduction of DC pensions is the changing employment
patterns.
12

The traditional Japanese pattern of a life-long employment has been graduallydisintegrating.

Thus, corporate pension schemes based on a long-term employment at a

fixed workplace needed to suit the new employment practices. One of the advantages of theDC pension, mentioned above, is that it is portable from a firm to another.

III. Current Issues of Pension System and 2004 Pension Reform
1. Financial crisis of public pension
Aggravated by rapid aging, low rate of economic growth, and near-zero interest rates,
the National Pension and the Employees’ Pension Insurance are facing a difficulty to secure
enough funds to meet the future burden of pension benefits.

Various reforms to restrain thepayments, including cutting back of future benefits, raising of premiums and raising thepensionable age from 60 to 65 (for the Employees’ Pension Insurance) have taken place inorder not to put too much burden on the future generations.
In the 2004 Pension Reform, the following reform was put in place:1) Raising theshare of the subsidy from the central government for Basic Pension from 1/3 to 1/2, 2)
Introduction of automatic adjustment of the benefit level to balance the premium income,3) mandating re-examination of the financial forecast every 5 years, and 4) strengthening
the collection enforcement of premiums.

2. Non-compliance and defaults in the National Pension
One of the biggest problems of the National Pension is that there are a growing numberof eligible and required persons who have not paid the premium in full.

According to thesurvey in 2004, as much as 0.36 million persons have not subscribed to the National (Basic)
Pension at all.

In addition, in 2004, the ratio of monthly premiums actually paid to fully

expected premiums was only 63.6%.

In addition, 15.0% of the Category No.1 was legally

exempt from paying the premium in 2004, making the financial situation of the National

Pension even worse.

Every effort is being made at central, prefectural, and municipal

government levels to decrease the default rate.

The default and non-compliance of the

National Pension is worse in younger generations.
To raise the compliance, the government has put in place a mechanism to exempt paying
premiums for low-income persons. In 2006, the 4-level exemption status was introduced,
where previously there were only two levels.
13

3.

Financial pressure on firms
At the same time, corporate pension schemes are also facing a number of problems.

first problem is financial.

The

Not only did the continuing recession of the Japanese economy

and very low interest rate made it difficult for corporations to keep defined-benefit corporate
pensions, it has also made it difficult for some corporation to keep paying the employers’
contribution for the Employees’ Pension.

It is required by law to participate in the

Employees’ Pension Insurance for firms of certain size and over, but some corporations havetaken a drastic measure to dissolve their Employees’ Pension Insurance and make theiremployees subscribe to the National Pension, which does not require employers to share apart of the premium.

4.

Duration of payment of premiums
As mentioned before, the traditional Japanese working pattern of the life-long employment

with a single employer has been gradually diminishing. Many people now switch jobs andtheir pension status, thus, change over the life-course. The pattern is more evident among
women who tend to leave and re-enter labor force during raising children.

Thus, it is

becoming increasing harder to put in the required payment period for pension premiums.
For the National Pension, to get the full benefit, one has to have paid the premium for 25
years, and the Employees’ Pension Funds also have, albeit shorter, required premium paying
period.

Many people, especially women, are unable to put in the required duration, and do

not quality to get the full amount.

The same problem is also applicable to foreigners whostay and work in Japan for only a limited number of years, and for Japanese who spend someyears abroad. Japan has entered into an agreement with some countries to exchange thepremium paying years between public pensions of two countries, but it is limited to a few
countries so far.

5.

Accommodating various employment arrangements and life-styles
There has been a big shift of employment arrangements from full-time to part-time,

especially among women workers.

However, the Employees’ Pension does not include

part-time workers, and many women adjust their working style in order to remain as
Category No.3 (dependent spouse of subscribers of Employees’ Pension). The 2004 Reform
did not actually implement measures to correct this, but it has mandated the government to14

review and take necessary action within 5 years.
The 2004 Reform implemented the following changes to accommodate the changing
life-styles: 1) extending the period of premium exemption for those taking maternity ofpaternity leave from 1 year to 3 years, 2) making it possible to divide the pension benefit of
the Employees’ Pension between husband and wife if they divorce, and 3) putting a time
limit of 5 years for survivor’s pension benefit for widows (widowers) younger than 30 years
old and with no children.

15Outline of the public pension system in Japan
Public Pension
Note
Type of Insurance

Insurer

Basic Pension

Employees' Pension
Insurnace

Basic
1st Tier
Mandatory

Supplemental
2nd Tier
Mandatory

Government

Government

All residents(categories 1-3)

Category 2 private-sector
workers under 65 whowork at workplaces withmore than 5 employees

70.29
98%
22.99
33%

32.49
45%
22.33
69%

Flat rate

Fixed % of salary

-None

7.32%
7.32%
(All income including
bonus: 6.79%)\13,860 (for Category 1 &2), \0 (Cat.3)
Not Available(including premium for
National Pension)

Employee
Employer% of subscribers exempt from paying premium
Default rate (as % of expected premium)

ExemptExempt5.3%
27.0%

ExemptExemptBenefit (Old Age) Type

Flat rate

Eligible persons
Number of subscribers (millions)% to all residents(20-59years)

Number of current pension recipients% to all subscribers

①
②
②/pop
③
③/②

Premium Type
Average contribution (% to salary) Employee
Employer

Average contribtion (\)

Average monthly salary of subscribers⑤⑥

Tax exemption

0%
1.6%(1997)

Income-related(Monthly income * 0.55% *\792,100 x ((insured months insured months * slide+ 1/3 x exemptrate)+ dependants
months)/480)
allowance

Calculation method
Average monthly benefits (2004) ⑦⑦/⑥
Replacement ratio (average)
Starting age
years
Benefits (Disability)

Calculation method

Average monthly benefits (2004)
Benefits (Widow/Widower)
Calculation method
Avg monthly benefits\313,679(2004)\52,565
65\167,529
53.4%
65

Flat rate

Income-related\990,100 (1st degree) or\792,100 (2nd degree) +dependents allowance

1st degree old age
pension * 1.25 +dependents allowance, 2nddegree: old age pension +dependents allowance, 3rddegree: old age pension

Not available\74,964\106,024

Flat rate\792,100+ children
allowance for wives
w/children

Income-related
3/4 of old age pension for
spouse or close family\81,935\89,998

Source: Kose Rodo Hakusho (2006), Kigyo Nenkin Hakusho (2001), Minist
16

(All numbers are as of 2005, unless otherwise noted)

Semi-Private Pension
Mutual Aid Pension

Employees' Pension
Funds

National Pension
Funds

Supplemental
1/2/3 Tier Combined
Mandatory

Supplemental
3rd Tier
Optional
Employers of more than 500
employees
Mutual Aid Associations

Supplemental
3rd Tier
Optional

Government

National and local civil
servants, teachers, etc.

Employees of above

Category 1

4.64
6%
3.47
75%

5.31
7%
2.76
52%

0.73
1%

Fixed % of salary

Fixed % of salary

Subscriber's choice

7.05～7.38%
7.05～7.38%

1.2 ～ 2.5%
1.2 ～ 2.5%

-None

0%

(including premium for
National Pension)\19,000
Not Available

ExemptExemptExemptExemptExempt up to \68,000

Income-related

Premium-related
Depending on premium &age at the time of entry

0%
17.11%(1997)
Income-related(Monthly income * 0.55%* insured months* sliderate)+ dependants
allowance

Average monthly salaryduring insured months *fixed rate + alpha\223,000(1997)\333,622 (2000)

65

Not available

Not available

65

65

Income-related
1st degree old age
pension * 1.25 +dependents allowance,
2nd degree: old age
pension + dependents
allowance, 3rd degree:
old age pension
Income-related
3/4 of old age pension
for spouse or closefamilystry of Health, Labor and Welfare Homepege http://www.mhlw.go.jp
17Chapter 3
Health Insurance
I. General Characteristics
1.

Public health insurance system
Japan’s medical services are financed through a public mandatory health insurance

system, which is composed of two types of schemes: occupation-based and region-based.
The former is called the Health Insurance.

Employers and employees of firms of a certain

size and over form a health insurance society and thus these are called the Society-managed

Health Insurance.

For those who work at smaller firms, the government provides acollective health insurance, which is called the Government-managed Health Insurance.

Inaddition, special professions such as civil servants, day laborers and seamen form separate
nation-wide professional associations.

These occupation-based public health insurances

cover employees and their dependents.

Those who are not covered by the Health Insurance

are required to participate in a region-based health insurance, called the National Health

Insurance, for which the municipalities act as independent insurers. (See Fig 3.1) Mostly
self-employed, farmers, workers of smaller firms and their family join the National Health

Insurance, thus its participants more or less overlap those of the National Pension.

Fig. 3.1 Public Health Insurance System
Occupation-based health insurance(Employees' Health Insurance)
Health Care Insurances

Region-based health insurance

Health Insurance
Government-managed Health Insurance
Association-managed Health Insurance
Day-Laborers Health Insurance
Seamens’ Insurance
National Government Employees' Mutual Aid Association
Local Government Employees' Mutual Aid Association
Private School Teachers and Employees' Mutual Aid Assoc.
National Health Insurance

Hence, these public health insurances provide nearly universal coverage over the
population. 1

The share of each scheme is shown in Fig. 3.2. The Government-managed

Health Insurance, the Association-managed Health Insurance, and the National Health

1 Those who are receiving public assistance are not covered by health insurance, since their medical
needs are met by the welfare payments.

18

Insurance each account for about one third of the total population.

Fig 3.2 Share of Different Public Health Insurance Schemes by Number of
Persons Covered (2006)
0.1%

Gov't-managed Health Insurance
28.0%

Association-managed Health
Insurance
Mutual Aid Association

40.6%

National Health Insurance
23.6%

7.6%

Other

Source: MHW Kose Hakusho (2006)

2.

Financing of health insurance
All the public health insurance schemes are financed by premiums, subsidy from thegeneral budget of the government, and co-payment from patients.

For the Health

Insurance, the premium is a fixed percent of employee’s salary, which is shared equally by
the employers and the employees.

For the National Health Insurance, the premium differs

among local governments and is usually levied on the basis of income, property, and numberof insured within a household.

A substantial government subsidy is given to the National

Health Insurance. For all Japanese medical insurance systems combined, the contribution
by government subsidy, insurance premiums, and patient co-payment were 32.2%, 52.9%,
14.9%, respectively (1998).

3.

Freedom of choice
Because Japanese health insurance systems are universal, there is no distinction

between public and private hospitals from the viewpoint of the user. In fact, users are free
to choose any medical service providers without constraint in terms of hospital type, locationor other factors such as having referral or not.

4.

Equal coverage of services at equal price
The coverage of health insurance and the prices of medical services are standardized bylaw, and thus, all persons receive the same medical service at equal price. The area coveredby the insurance is shown in Fig. 3.3.
19

Fig. 3.3

Medical Services Covered by Health Insurance
Advanced medical research

Advanced medical
Medical checkup
Cash benefits(sickness andinjury, childbirthallowance, etc..)
Prevention/HealthMaintenance

Medical Services

Massage, acupancture, etc.

care
Hospital facility fee

Specialroom fee

Meal expense
duringco-payment
hospitalization

Special meals
Uninsureddental care,etc.

OthersNon-prescription

High Quality
Environment

Health service facility fordrugs

the elderly, Medical cost

Facility fee

Co-payment
At home medical services

NursingLong-term
medical care

Nursing AttendantsLong-Term Care/Welfare= Medical costs covered by health insurance= Other medical costs
Source: MHW Kose Hakusho 2000

5.

Rising health care cost for the elderly
As the aging of the population proceeds, the share of the health care costs for the elderly

in total medical costs has increased.

However, because the composition of subscribers

differs among insurance schemes, some insurance schemes, such as the National Health

Insurance, have a larger number of elder subscribers than others and had to bear a bigger
financial burden.

To equalize the burden of the health care costs for the elderly among

insurance schemes, a new system was introduced in 1983. Under the system, the healthcare costs for those aged 70 (See page 22 for details) and over in all schemes are separated
from that for under age 70, and it is divided by all insurance schemes.
component of the rising cost was the long-term care.

One of the big

To rectify this problem, theGovernment has introduced a mandatory Long-Term Care Insurance in April 2000.

20

II. Health Insurance Schemes
1.

(Employees’ ) Health Insurance (Occupation-based public health insurance)
People covered under this type of insurance are employees and their dependents.

Allemployed persons are required to join the association, except those who are employed byprivate firms with less than five employees and self-employed.

Depending on theoccupation and size of employers, there exist several programs as described below.
(a)

Association-managed Health InsuranceThis scheme is operated by health insurance associations organized by large firms fortheir employees.

Sometimes more than one firms form a single association.

Currently,

there are 1,584 such associations and 30 million individuals are covered by them (as ofApril 2006).

However, due to the high cost of keeping them, more and more firms are

dissolving such associations, and their number has been declining lately.
(b)

Government-managed Health InsuranceThis is for the employees of small and medium scale firms, which cannot form a healthinsurance society on its own.

The Government provides a collective health insurance forthem, with contributions from the employers and employees.

About 36 million

individuals are covered by this type of health insurance (as of April 2006).
(c)Other Occupation-based health insurance

•
•
•
•
•

Seamen’s Insurance
Day-Laborer’s Health Insurance
National Government Employees’ Mutual Aid Association
Local Government Employees’ Mutual Aid Association
Private School Teachers and Employees’ Mutual Aid Association

The first two are operated by the Government, and the other three, by each mutual-aid
associations.

2.

National Health InsuranceThis scheme covers all those who are not covered by the Health Insurance, i.e.

self-employed, farmers, students, and so forth.
covered by this scheme (April 2006).

Currently 52 million individuals are

The insurers are municipalities in most cases, except

for special professionals such as medical doctors who form National Health Insurance21Societies on their own. Retirees who previously subscribed to the Health Insurance are
insured under the National Health Insurance.

However, the health care cost for theretirees aged between 60 and 70 are financed by the transfer from the Employees’ Health

Insurance, i.e. retiree’s former insurer.
The National Health Insurance is financed by the government subsidy as well as theinsurance premiums collected from its subscribers on household basis.

The premium

amount differs from a municipality to another, and is based on both income and number ofpeople who will be covered within the household. The premium can be discounted up to
60% for low-income households.

3.

Health Insurance System for the Elderly
Previously, health insurance for the elderly was covered under the National Health

Insurance, except when they are financially dependent on their family and are covered by the
Health Insurance of their family as their dependents. However, as a result of an increasingly
aging population and rising cost, this arrangement led to an unbearably heavy burden on the

National Health Insurance. Thus, a special program was created for those aged 70 and over,and for those between 65 and 70 years old who are bed-ridden or have severe disabilities.
Under this program, the health care costs are mostly met by the subsidy from the central andlocal governments (30%) and the transfer of contributions from the National Health Insurance
and the Health Insurance (70%) with minimal co-payments from the elderly.

III.

Medical benefits and Co-Payment Rate
Under the Employees’ Health Insurance and the National Health Insurance, the insured

and their dependents pay 30% of cost of all care, normally.

The children under 3 years old

only need to pay 20%, and the elderly above 70 years old, 10% (except for those elderly withhigh income, 20%). For both schemes, there is a maximum limit of co-payment, above which
is borne by the government.

The limit is 63,600 yen a month or the 22% of the averagemonthly salary, plus 1% of the cost over a certain amount for one illness.

There are a lower

threshold for low-income families and a higher threshold for the high-income families.

22

IV.
1.

Current Issues and recent reforms of the public health insurance
Health Insurance for the elderly and the 2006 Reform
As mentioned earlier, Japan’s public health insurance is going through a financial crisis.

One of the main problems is the rising cost for the elderly which has been putting a upward
pressure on the total health care cost.

The share of public health expenditure .in thegeneral public outlay has increased from 11.7% in 1980 to 17.1% in 2004 (Fig 3.4).

Fig. 3.4

Share of Public Health Expenditure among Total Public Expenditure

18
17
16
15
14
13
12
11

19
80
19
85
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04

10

Source: Kose Rodo Hakusho 2006

Meantime, Japan has been implementing a series of small reforms, keeping the current
system mainly in tact. The reforms from 2002 to 2006 raised the co-payment rate for bothold and young generations.

For those below 69 year old and who are in the Health

Insurance, the co-payment rate was raised from 20 to 30% (Subscribers of the National
Health Insurance already face 30% co-payment rate).

The premium rate is also reformed tobe applied to the entire annual salary, including bonuses. For those above 70 years old andabove a certain income criteria, the co-payment rate is raised from 10 to 20% in 2002. The
co-payment for the elderly was again raised in 2006 (the co-payment was raised from 10% to
20% for those aged between 70 and 74 and for those elderly with high income, to 30%). The
monthly upper limit of co-payment is also raised according to the income of the subscriber.
The 2006 Reform enacted two new schemes both of which will start in April 2008.

One isthe “Health Scheme for the Late Elderly (Koki Koureisha Iryo Seido). This system will
cover those who are above 75 years old. It will be financed by premiums (10%), transfersfrom the young generations (National Health Insurance and Employees’ Health Insurance)23(40%) and general government budget (50%).

The other is the “Health Scheme for the Early

Elderly (Zenki Koureisha Iryo Seido). This scheme which will cover those from 65 to 74, is abudget transfer scheme, similar to the Health Insurance System for the Elderly which is now
in place.

In effect, the reform separates the coverage for those over 75 from the Health

Insurance system for the Elderly.

3.

Reform of medical fee System
Under the current systems of fee-for-service payments, medical providers are paid, inprinciple, for whatever services and medicine they provide. Thus, there is an incentive for
medical providers to over-examine and over-prescribe medicine, creating a tendency tohigher medical costs. In addition, there has been a gradual shift from acute to chronic
diseases.

This has led to a debate on a reform of the fee schedule to fixed prospective

payments so that doctors are paid a fixed amount depending on the type and severity of thedisease, sometimes called DRG (Diagnosis Related Groups) method. This system has been
experimentally introduced earlier, and in the 2006 Reform, was expanded.

Table 3.1 Financial Standing of Health Insurance Schemes (2004)
Government Managed
Health Insurance

Association Managed
Health Insurance

National Health
Insurance

60,221
7,942
163
68,32658,09749
1,389
59,536

26,67136,357
15,176
78,203

38,95629,96547,81518,993

14,42822,3616,888
1,084
65,921
2,405

7,016
5,064
56,474
3,062

6,340
76,516▲ 2,800

IncomePremiums
Government Subsidy
Other
Total
Expenditure
Benefits
Outlay for HI for
Elderly
Outlay for HI for
Retirees
Other
Total
Balance
Source: Kose Rodo Hakusho 2006

24

4.

High Default rate of the National Health Insurance
The National Health Insurance has a mechanism to include low-income individuals into

the “universal” health insurance.

As noted earlier, the premium structure is set by eachmunicipality, but the reduction of the premium for low-income households is done according
to the rules set by the central government. Currently, up to 60% (in some municipality 70%)of the premium can be reduced for households whose income is below a certain level (thestatistics on the number of people whose premiums are reduced are not readily available).
However, even with schemes to exempt part of the premium, the number of households
who have defaulted has been increasing rather rapidly. The latest statistics is for 2003, andnearly one in five households who are subscribing to the National Health Insurance failed to
pay premiums.

Even though they can continue to receive medical care for some time,

eventually their right to receive it is relinquished.

25

Outline of the Health Insurance System in Japan
Health Insurance
1)

Name

2)

Eligible subscriber

3)

Number of subscriber(millions) Dependents

4)

Insurer (number oforganizations)5)

Premium rate:
Subscriber
Employer

6)

Gov't Subsidy to:Administrative cost
Medical cost
Contribution for thehealth care for elderly
Co-payment:
Subscriber

7)

Dependents
Inpatient meal expense
Maximum
Allowance:

8)

10)

14.79
15.20
Health Insurance
Associations (1,584)

0.07
0.11
Government

4.10%
4.10%

3.335% (avg)
4.149% (avg)

4.55%
4.55%

All
13%

All
\10.3 billionAll\3 billion

16.40%

--

-30%

30%
\260/meal (for low-income family \210/meal for first three months\80,100 (for low-income person \35,400)\350,000

Funeral expense\50,000

Due to childbirth

Due to unemployment
Disaster Relief:\50,000\350,000
2 months ofsalary (min.
\100,000)
1.4 month ofsalary (min.
\50,000)

60% of avg. wage

60 % avg. wage

Up to 18 months
60% of avg. wage

Up to 3 years
60% of avg. wage
Unemployed days
before birth, 56
days after

42 days before birth, 56 days after--

For deathFor death of a family
memberFor disaster

---

--

-Source: Kose Rodo Hakusho 2006, Shakai Hosho Tokei Nenpo, 2006

26

Seamen

18.93
16.69
Government

Childbirth allowance

Fun.exp. for dependents
Unemployment benefits:
Due to sickness

9)

Seamens' Insurance

Gov't-managed Health Association-managed
Insurance
Health Insurance
Employees of Small- Employees of Large
Medium firms
firms

---

All numbers are as of March 2005 unless otherwise noted.
National Govt
Private School
Employees' Mutual Aid Local Govt Employees' Teachers &Association
Mutual Aid Association Employees' MAA

National Govt Civil
Servants

Local Govt Civil
Servants

1.11
2.87
1.42
3.47
Mutual Aid
Mutual Aid
associciation of each associciation of each
local govt (54)ministry (21)

Private School
Teachers &Employees
0.47
0.37

2.75 ～ 4.30%
2.75 ～ 4.30%

4.36%
4.36%

3.69%
3.69%

National Health Insurance

Self-employed, farmers,etc.

Retired

47.61

3.97

7.28

Municipality(2,531)

National Health
Insurance
Associations(166)

Municipality(2,531)

Avg.premium per family \160,346----(2004)All

All (by local govt)

Partial

All

All

--

--

--

45%

32～52%

All
--

--

--

--

--

--

--

%

30%

%
--s, \160/meal after 3 months, or for most low-income family above 70 years old \100/meal)standard amount\350,000

standard amount\350,000

standard amount\350,000

standard amount \350,000\50,000\50,000\50,000

Set according to the law\50,000\50,000\50,000--

65% of avg.salary

80% of salary

80% of avg.salary
Up to 18 months(except for TB 3
Up to 18 months
Up to 18 months(except for TB 3 yrs) (except for TB 3 yrs) yrs)
65% of avg.salary
80% of salary
80% of avg.salary
42 days before birth, 42 days before birth, 42 days before
56 days after
56 days after
birth, 56 days after
50% of avg. salary
60% of salary
60% of avg.salary
1 month of avg.
salary70% of monthly avg.
salary0.5 to 3 months of
avg. salary, due toseverness

1 month of salary
70% of monthly
salary0.5 to 3 months ofsalary, due toseverness

1 month of avg.
salary70% of monthly avg.
salary0.5 to 3 months of
avg. salary, due toseverness--

Standard not set

Standard not set

-----

27

Chapter 4
Social AssistanceI.

General Characteristics

1. Explanation of terms
The social assistance in Japan can be divided into: (1) Income assistance for the poor and(2) Social services and assistance for socially disadvantaged people.

The former is called the

Public Assistance, while the latter includes Welfare for the Children, Welfare for the
Disabled, Welfare for Single-Mother Households, and Welfare for the Mentally Disabled
People depending on the specified target group.

The Public Assistance includes bothin-kind and in-cash assistance to the poor household, while the latter includes mostly
services such as at-home and institutional services, but sometimes in-cash assistance.
Thus, the term welfare is used widely to indicate various social assistance programs andinstitutions that fall within the above-mentioned areas.

Most of these programs,

institutions and services are provided from the general budget of the government andmunicipalities.
Until the Long-Term Care Insurance was introduced in 2000, the services for the elderly
were also termed the “Welfare for the Elderly”. However, many services for the elderly are
now covered by the Long-Term Care Insurance, and thus, it will be discussed in Chapter 5.

2.

Means test and universality
The Public Assistance Law stipulates a principle that every citizen has a right to claim

public assistance without discrimination, regardless of reasons for falling into hardship.
However, the Public Assistance is provided with fairly strict means and asset tests, whichmight be a reason for low percentage of population receiving the public assistance. The

Child Allowance and Child Rearing Allowance for single-mothers are also provided with ameans test, but the threshold is much higher than that for the Public Assistance.
On the other hand, most of the services provided at institutions for the disabled andchildren are provided to all, even though there is a difference in fee depending on the incomeof the recipient.

28

II. Assistance Schemes
Here, main features of the following three categories of the social assistance will be
described.

1.

Income assistance, rather than services, will be the main focus of the discussion.

1.

Public Assistance for the poor

2.

Welfare for Children (including Single-Mother Households)

3.

Welfare for the Disabled

Public Assistance for the poor
The root of Japan’s public assistance goes back to poor relief before the World War II.

Today’s public assistance has its legal basis on the Revised Public Assistance Law (New)enacted in 1950. The Law stipulates four fundamental principles: (1) public assistance tothe people in need is a responsibility of the state, (2) all citizens 1 have a right to claim public
assistance without discrimination of sex, social background and reasons for falling into
hardship, and only the economic condition is the criteria of receiving assistance, (3) the state
guarantees to all citizens a minimum level of healthy and cultural life, and (4) public
assistance is a supplement to all resources available to and the best efforts exerted by theapplicant.
The public assistance is provided upon a receipt of an application from a household in
need and after a careful examination of the application.

The assistance is calculated bysubtracting the household’s final income from the minimum cost of living.

In case theminimum cost of living exceeds the final income, the difference is given as the assistance.
The minimum cost of living is calculated from seven categories of expenses: livelihood,housing, educational, medical, maternity, occupational, and funeral expense.

The

calculation of the minimum cost of living takes into consideration the differences in living
costs among different regions of the country, and household members’ age.

All assistance isprovided as cash transfers, except a few such as medical costs, which are provided as in-kind.

(a) Means test
The principle (4) of the Public Assistance states that the Public Assistance must be a
supplement to the person’s best efforts and available resources.

In other words, the person

1 The Public Assistance Law (New) excludes foreigners from this right, but currently, by order, legal
foreigners are given “equal treatment as citizens”. Illegal foreigners are not covered.

29

is required to use all available resources, including assets, ability to work, as well as
assistance from those who are required to support the person by law.

Assets such as land,houses and farms must be sold, except in the case where the person is actually living or
utilizing it and the value of the assets is higher when it is utilized than when it is sold.
Household goods such as TV are allowed if the diffusion rate of the goods is more than 70%
in the region.
As for the utilization of the ability, the person will not be able to receive assistance if
he/she is judged as capable to work. If the person has a will and ability to work, but isunable to find work, it is unlikely that he/she would be given assistance.
The civil law states that certain relatives and family members are required to support a
person in need.

Thus, the public assistance is given only after it is judged that this support

is not available. In practice, spouses and parents of a minor (less than 20 years old) havestrong responsibility to support the person.

(b)

Statistics
In 2004, 998 thousand households or 1,423 thousand persons (1.1% of the population)

received some types of public assistance (monthly average).

The share of the population

receiving the assistance had been declining until 1995, but since then there has been acontinuous rise.

Among those receiving the assistance, elderly household make up thelargest share, accounting for 46.7% of all recipient households, and has been increasing forsome years.

The share of the household with a disabled or sick is also large, at 35.1%.

About 8.8% are single-mother households, and the rest, 9.4%, is classified as “other types ofhouseholds”. The large share of households with the elderly, disabled or sick may be thereason that the most of recipient households (87.6% in 2004) do not have any working
member.
By age, those above 70 years old comprise the largest share (27.1%).

Those between 60

and 69 year olds also consist 20.4% of the recipients. The elderly in general have highcoverage rate (i.e. % of those who are recipients of the Public Assistance among the general
population of that age group).

About 1 in 5 elderly above 60 years old are the recipients of

the assistance, where only about 6.8% of the children aged less than 5 and 3.9% of those aged
between 20 to 39 years old were the recipients (Table 4.1).

30

Table 4.1

Age

Break-down by age, Public Assistance Recipients (2005)

Share (%)

<5
6 to 19
20 to 39
40 to 49
50 to 59
60 to 69
70+

Coverage rate (% inAssistance)

3.2
13.4
9.2
8.1
16.3
22.7
27.1
100

6.8
11.1
3.9
7.3
12.2
20.4
21.3
11.22

Fig 4 .1 B re ak - do w n by th e D u ratio n o f Re c e ivin g
Pu blic As s is tan c e ( 2 0 0 5 )Less than 6 months
6.2%
More than 10 years
25.5%

6 months to 1 year
6.3%

1-3 years
22.5%

5-10 years
22.9%

3-5 years
16.7%

F ig 4 .2 Working/N on- w or king H ouse hold s re ce iv ing P u blic
A ssit a n ce (2 00 4)
Household member
working
2.4%

No working household
member
87.6%

Household Head
Working
9.9%

Day-Laborer
1.4%
At-home sidejobs
0.6%
Others
1.2%

Employee
6.7%

31

32

＋
Others*per disabled
persons

Additional
if applicable＋byregionHousing＋

per children
by grade(elementaryand middle
school)Education＋

averagecost
requiredfortreatment

Medical＋* Others include children under age of 3, pregnant women &sick persons being treated at home requiring special meals.
Items seen as One-Time Requirements and is provided in addition to monthly expense
1 Bed (if not in possession), clothes for new-born, diapers, etc.
2 Expenses for entering school
3 End-of-year expenses
4 House maintenance for electricity, water, etc.
5 Others

by numberof household
members

per personby ageby region＋

Livelihood
household

Determination of Monthly Minimum Cost of Living

Livelihood
individual

Fig.4.3

asrequiredbythehousehold

Others2. Welfare for Children (including Single-Mother Households)(a) Child Allowance and Special Child Allowance
This is an area where there have been significant reforms within past few years. The
new interest in reforming the Welfare for Children is spurred mainly due to the concern
about the low fertility, now estimated to be at 1.26 (2005). Previously, the Child Allowance
was granted to parents (or guardians) who are raising children less than 3 years old andwhose income is less than a specified amount. Since 2000, the age limit has been raised to 6
years old, then to 9 years old and now to 12 years old. The income threshold was also raised,
and thus the Child Allowance today is nearly universal. The amount of the Child Allowanceis ¥5,000 per month for the first two, and ¥10,000/month/child for subsequent children.
The financial burden of the Child Allowance for children 0 to 3 years old is born by employer,
central, prefectural and municipal governments, but the expansion of the scheme in the last
few years has been totally financed by the central government.

Table 4.2 Number of Child Allowance Recipients and Expenditure (2004)
Number of
Number of Children
Recipientscovered(2004)
Total
7,473,761
9,644,674(of which SCA)
(537,164)(595,915)
Employee
4,935,807
6,337,127(of which SCA)
(401,043)(438,447)
Non-Employee
1,932,029
2,500,727
Public Servants
605,925
806,820(of which SCA)
(136,121)(157,468)
Source: Kose no Shihyo (Journal of Health and Welfare Statistics) 2004

Expenditure(unit: million yen)593,336(39,066)
387,372(28,473)
155,747
50,217(10,593)(b) Child Rearing Allowance (for single-mother households)
Child Rearing Allowance is given to single-mothers who are rearing a child less than 18
years old, who does not share a common household income with father and whose earnings
for the previous year is less than the threshold. The monthly allowance is ¥41,880 in caseof one child, ¥5,000 for the second child, and for third and subsequent children additional¥3,000 for each child (2006). In 2002, the income threshold for receiving the full amount of
the allowance was lowered and tapering of the allowance amount as the income rises wasintroduced.

For a single-mother household of two (mother and a child), the income

threshold is now stands at ¥3,650,000 for full allowance, and for those whose income isbetween ¥1,300,000 and ¥3,650,000, the allowance is tapered to zero. The 2002 reform also
stipulated that the government may reduce the amount of the benefit up to 50% after a33single-mother has been a recipient for 5 years.

The 5-year time limit will be implemented

from April 2008. The idea behind this reform was to convert the benefit to a temporary
measure to assist the initial phase of being a single-mother.

It is expected thatsingle-mothers will gain enough experience to achieve self-sufficiency after 5 years, andvarious schemes of job training have also been put in place.

However, there has been asevere outcry against the reform from the single-mother community and whether and how itwill be implemented is still unclear.

(c) Child Care Facilities (Day-care centers, etc.)
Municipal governments are required by the Child Welfare Law to provide day-care
centers for children whose parents are not capable of taking care of them for reasons such as
work, illness, and care of other members of the family.

Day-care centers typically provide 8hours of care, but demand to extend the hours has been increasing.
quality measures are tightly regulated by the municipality.

The staffing and otherFee for day-care centers differ

from a municipality to another, but is usually set so that it depends on income and number ofchildren of the household.

34

3. Welfare for the Disabled
The measures for people with disabilities are divided into (1) those for people withphysical disabilities, (2) for people with mental disorders, (3) for children with mental andphysical disabilities and (4) adults with intellectual disability.

Measures are mainly

institutional services and in-home services. Tables 4.3 and 4.4 list services provided.
Table 4.3
Measures for People with Physical Disabilities
Community Service
Rehabilitation
Provision of medical rehabilitation service
Home visiting examination and rehabilitation counseling
Provision of goods
Provision of technical aids for daily life
Provision of daily life appliances
In-home care
Allowance for people with special disabilities
Home-help service
Short term stay program
Health care
Health checkup
Social participationCounselingDay-service programs
Sheltered day workshops
etc.
Institutionalized Service
Rehabilitation
For persons with disabilities of limb or bodyfacilities
For the blind
For the deaf
For people with internal disorders
For people with severe disabilities
Residential facilities Custodial care homes
Welfare homes
Work facilities
Sheltered workshops
Sheltered workshops for people with severe physical disabilities
Sheltered Day workshops
Welfare factories
Community
Welfare centers (health care and relaxation activities)
facilities
Day service centers
Recreation centers
Facilities for braille publication and Braille libraries
Information center for the deaf
Source: MHW, 2000
Facilities for production of prosthetic appliances
Homes for the blind
Table 4.4

Measures for People with Mental Disorders
Medical services
Psychiatric hospitals and clinics
Community services Day-care
Visiting guidance for user groups
welfare counselingSocial rehabilitation Dormitories(for those unable to carry out
services
Short-term residency
daily lives on their own)
Welfare homes(for those who can carry out daily
lives on their own, but have no place to live)
Welfare factories(provide workplace)
Sheltered workshops(those who can work, but have no place
to live)
Group homes
Small workshops(work training)
Source: MHW, 2000
Social rehabilitation programs
Counseling

As for the income assistance, disability pensions under the National Pension, theEmployees’ Pension Insurance schemes, and the Allowance for Special Disabled Persons are
35

granted for eligible persons with disabilities who are over 20 years of age. For households
who are raising children with disabilities under age 20, the Family Allowance for Special

Children and the Welfare Allowance for Disabled Children are applicable. If the sum of
eligible allowances and any other income is under the minimum cost of living, the Public

Assistance, as discussed in section II.1, is granted to secure the minimum standard of living.
Amount of each allowance is summarized in Table 4.5.

Table 4.5
Allowances

Amount (monthly)
Eligibility

Pensions

Income Assistance for the Disabled, 2002
Allowance for Special
Disabled Persons

Welfare Allowance for
Disabled Children

Family Allowance forSpecial Children\26,440\14,380\50.750 (1st degree)\33,800 (2nd degree)
Those raising disabledchildren and is notreceiving disability
pensionDisabled persons over 20
Those raising disabled
years old requiring
children requiring special
special care and living at care and living at homehome

National Basic Pension

Employees' Pension InsuranceType

Flat rate

Income-related

Amount\990,100 (1st degree) or \792,100 (2nddegree) + dependents allowance(monthly)1.25 * Amount of Old Age Pension (1stdegree) or 1.00 * Amount of Old Age
PensionEligibility

Over 20 years of age, who have paid For those who have become disabled
2/3 of premium period and those who during insured months (for those underare under 20 at the time of becoming 300 months of insurance period, 300 is
applied)disabled and who have turned 20

Source: Kose no Shihyo (Kokumin no Fukushi no Doko) 2002

36

III. Current Issues
1. The Reform of the Public Assistance
The Public Assistance is one of the oldest schemes of social security system in Japan.
The recent upward trend in the number of recipients and expenditure of the Public
Assistance has become controversial and the Public Assistance program has become one of
the main target for budget restraint in the policy debate.

One of the criticisms of the

program was that the benefit level is too high, compared to the income level of people who do
not receive Public Assistance benefits.

For example, the benefit level for single-mothers waspointed out to be higher than many of single-mothers who are “managing on their own”.
While many scholars argue that this is not the problem of the benefit level, per se, and the
problem is the fact that many people do not receive the benefit even though their income
level is so low (i.e. the take-up rate of the program is rather low).

Meantime, thegovernment has demolished the additional benefit which was previously given to
single-mothers and elderly households.

2.

Need to create a society favorable to child rearing
Japan has faced a rapid aging of the population, which is caused by both a decrease in

the fertility rate and an increase in the life span. In order to stop the trend toward a society
with a few children, it is necessary to create an environment favorable to child rearing.
However, many Japanese working parents rely much on mothers staying at home or
grandmothers taking care of children.

As the number of working mothers rises, there has

been a severe shortage of day-care centers, especially for 0 to 2 year olds, within
metropolitan cities.

In 1999, the Government has allocated a special supplemental budget

to reduce the number of waiting children for day-care centers.

Yet, more efforts in this field

are needed to increase the number and diversify the kind of day-care centers and othermeasures to help working parents.

Measures to help not only working parents but also

non-working mothers, who are feeling stress of bringing up children in the absence ofextended family and community ties, will work to create a child-rearing easy society.

37Chapter 5Long-Term Care
I.

General Characteristics

Introduction of the Long-Term Care Insurance
Starting in April 2000, Japan introduced the Long-Term Care Insurance.

The insurance

system covers the long-term care of the elderly, which was previously provided partly
through the health insurance system and partly by the welfare measures.

The maindifferences between the Long-Term Care Insurance and long-term care provided by the priorsystems are shown in Table 5.1.

The new system grew out of the recognition that, due tochanges in the society such as weakened community ties, increase in small-sized families,
and increase of working women, financial and psychological burden of family facing the carefor the elderly has become unbearably large. The Long-Term Care Insurance is designed toshare the burden of caring for the elderly among all members of the society and lessen theburden of the family.

In other words, it aims to establish a system that responds to society’s

major concern about aging, and to assure the citizens that they will receive care, if necessary,and be supported by society as a whole.

Furthermore, it is expected to alleviate thefinancial pressure of ever increasing long-term care cost of an aging society on the healthinsurance systems.
Table 5.1

Differences between New and Old Care Systems
Old
Welfare for the Elderly

New
Long-Term Care Insurance
Those aged 65 years old andThose aged 70 years old and over
over and those between 40and those between 65 and 70 with
64 who are subscribers of
disabilities
medical insurance
Insurance for the Elderly

Service Target

Low-income, living alone orother requirements

Eligibility for Service

Care needs and conditions offamily structure, income, etc.

Care needs

Co-payment

According to ability to pay\530/visit, \1,200/day of
hospitalization

Service Providers

Public welfare facilities

Medical facilities

No

Yes

Freedom of choice by user
Source: Nihon Iryo Kikaku, "Iryo Hakusho, 1998"

38

Care needs
10% of service fee
Public or private carefacilities, medical faicilities
Yes

II.

Long-Term Care Insurance Systema)

Insured
The insured persons are those who are aged 65 and over (Category 1) and those between

ages of 40 to 64 and are subscribers of health insurance (Category II).

Currently, about 24

million persons are subscribed as Category I and about 43 million persons, as Category II (asof April 2006).

The premium is collected through municipality and deducted from pensions

for the Category I, and through additional premium to be paid to health insurance for theCategory II. Premium amount is determined by each municipality, and thus differs from amunicipality to another.

Premium is income-related, and there will be measures tomoderate the burden for low-income persons.

b)Service provided
A list of care services is shown in Table 5.2. The services are provided both at home andat institutions depending on the care required by user. The user is free to choose the kind ofcare and its providers, which can be either public or private.

c) Source of financing
The cost incurred in the Long-Term Care Insurance is financed by premiums,
government subsidy and co-payment of users.

Apart from the co-payment of the users, thecost is financed 50% by premiums (19% by Category I, 31% by Category II) and 50% by
government subsidy.

Within this framework the municipality can determine the rate ofpremium for the insured of Category 1.
average (2000-2002).

It is estimated about 2,900 yen per month on

For the Category 2 insured the rate will be 0.95% of salary in the

Government-managed Health Insurance and 0.88% in the Society-managed Health
Insurance.

Co-payment for the services is 10% of the cost, plus, for those in a hospital or an

institution, a part of the meal expense.

d) Assessment of the care-needs
The users are classified into 6 categories (“Assistance Required” and ”Care Required
Level 1 to 5”), depending on the severity of the care need.
provided is determined according to this category.

The upper limit of services

The user must be assessed by themunicipality into one of the categories before applying for the services.

39

Table 5.2
Care under Long-Term Care Insurance
Service for those staying at
Service for those who arehomeinstitutionalized
Home-help
Special nursing homes for the elderly
At-home bathing
Long-term care at health facilities for
the Elderly
At-home nursing
At-home rehabilitation
Long-term care at medical carefacilities for sanatorium (sanatorium
Out-patient rehabilitation
words, etc.)
At-home medical caremanagement counselingDay-service
Short-stay service
Group home for elderly withdementia
Long-term care at private
homes for the elderly
Provision or subsidy for careequipment
Subsidy for home alteration
to meets care needs
Source: Shakai Hosho Nenkan 2002

Fig. 5.1 Diagram Representation of Long-Term Care Insurance
Service Providers

InsuredPublicandprivatecare
providersCategory 1(over 65 yrs),
25 million(2006)

premium

Service20%
Collected
bymunicipality
80%
Taken out
frompensions

co-payment

Municipalities
Assessment ofof careneededSource: Shakai Hosho Nenkan 2006

40

Category 2(40-64 yrs),
43 million(2006)

premiumCollected
by healthinsurances
Fund

Budget(Municipality)
Premium
fromCat. 1(19%)

Govt.
Subsidy(50%)(Central 25%,
Prefecture
Premium
12.5%,
from
Municipality
Cat. 2
12.5%)(31%)

III. Current Issues
1.

Financial Strain and the Reform
Soon after its enactment, it has become evident that the initial financial arrangement was

not enough to meet the cost of the long-term care.

The number of care recipients grew from1.49 million (0.52 in institutions and 0.97 at-home care) in September 2000 to 3.29 million(0.78 in institutions and 2.51 at-home care) in April 2005.
steadily

The financial outlay grewfrom ¥3.6 trillion (2000) to ¥7.1 trillion (2006 estimate). Further, the baby boom

generation will begin to become elderly in 2015.

With such background, the long-term careinsurance was reviewed and several reforms were put in place five years after its enactment.
The major reforms were:
1) In view of the increase of those who require relatively little care (Level 1 or “assistancerequired”), a new program was introduced whose purpose is the prevention of future careneeds. 2) To balance the benefit payment between at-home and institutionalized care, theliving expense (meals at institutions, etc.) of care facilities was no longer covered by the
insurance.

At the same time, for those with low-income who can not afford to pay the meal

expenses out of pocket, certain measures were put in place. 3) Services are reorganized asregion-based, and 4) care management certification process was revised.

2.

Response to the rise of insurance premium and the co-payment
Another issue is the amount of premium.

For the insured of the Category I, thepremium is deducted from pensions or collected separately by the municipality, and for theCategory II the premium of the Long-Term Care Insurance will be added on top of the healthinsurance premium.
municipalities.

There is also a considerable variation in the premium among

There has been a considerable out-cry from low-income households who

cannot bear the premium or/and the co-payment, and as a response municipalities set the
maximum of 5 levels of premium structure according to the insured’s income.

The Reform

added another level, so that the premium structure is currently 6 levels.

3.

Determination the Category
Assessing the true requirement of the elderly, and categorizing into 6 categories is very

hard.

Especially in case of dementia, there have been reports that they are likely to beclassified in a lower category.

41

Chapter 6
Employment Insurance
I.

General Characteristics
Japan uses the term “Labor Insurance” to mean both the Labor Accident Insurance andthe Employment Insurance. The two are independent schemes, but in some respects, suchas the collection of the premiums, are treated together. In this Chapter, the focus of the
discussion is the Employment Insurance.

Employment Insurance has two functions. One is to provide employees cash benefit incase he/she loses the job.

The other is to support employers to prevent them from laying off

The former is called the Unemployment Benefits, and the latter consists

their employees.

of three components, namely: Services for employment stabilization, Services for developing

human resources, and Services for employees’ welfare. The Unemployment Benefits also
include a variety of benefits such as the Job Applicants’ Benefits, the Study and Training

Benefits, and the Employment Continuation Benefits. The entire scheme is shown in Fig.
6.1.

II. Employment Insurance System
1.

The Basic Allowance for the Job ApplicantsThis is the most commonly referred to as the “Unemployment Benefits”. For generalemployees, it is necessary to have been insured for at least 6 months within one year prior toleaving the job.

The duration of the benefits ranges according to the age of the beneficiaryand the years of being insured. Since April 2001, the duration of the benefits also depends
on the reason of the unemployment, i.e. whether the termination was voluntary (including
retirees) or involuntary and without enough time period to arrange re-employment (due tolay-off or bankruptcy of the firm). The Tables 6.1 to 6.3 show the number of days for eachkind of recipients.
2.

Old Age Continuous Employment Benefits
This is a scheme for old employees who are between ages 60 and 65 and continue to workat a salary lower than 85% of their salary at age 60. They have to be insured for at least 5
years before receiving the benefit.

42

Fig. 6.1

Employment Insurance

Job Applicants’ Benefits
General employees

Basic Allowance
Skill Acquirement Allowance

Employment Insurance

Unemployment Benefits, etc.

Lodging Allowance
Injury and Sickness Allowance
Old-Age Employees

Old-Age Job Applicant Benefit

Short-term emp.

Special Lump-sum Allowance

Daily Labor.

Day-Labor Job Applicant Benefits.

Study & Training Benefits
Employment Promotion Benefits

Re-Employment Allowance
Moving expense, etc.

Continuous Employment Benefits
Old Age Continuous Employment Benefits
Child Care Leave Benefits
Family Care Leave Benefits

Services

Service for Employment Stabilization
Service for Developing Human Resources

Service for Employees’ Welfare

43

Table 6.1

Duration of Basic Allowance (General Employees)(unit: days)
Years of being insured
Less than 5<= and 10<= and More than
5 years<10 years <20 years 20 years

GeneralShort-term

90
90

120
90

150
120

180
150

Data is effective starting April 1, 2001.

Table 6.2

Age ofbeneficiaryLess than 30

Duration of Basic Allowance (Involuntary terminated Employees)(unit: days)
Years of being insured
Less than 1<= and 5<= and 10<= and More than
1 year<5 years <10 years <20 years 20 years

90
(90)

30～44
45～59

90
(90)

60～64

90
(90)
180
(90)
150
(150)

180
(150)
210
(180)
270
(240)
210
(180)

180
(150)
240
(210)
180
(150)

--240
(210)
330
(300)
240
(210)

For those difficult to get employed(disabled, etc.)
Less than 45
150
300
45～64
150
360
Less then 30
(150)
(240)
30～64
(150)
(270)
* numbers in ( ) are for part-time workers
Data is effective starting April 1, 2001.

Table 6.3 Duration of Old-Age Job Applicant Benefit(unit: days)
Years of being insured
Less than 1 1<= and <4 More than 5
year
years
years
Continuously older workers
Short-term workers

44

30
30

60

75
50

3.

Rise of Part-time and temporary employment in the young and the women
Partly due to high unemployment, and partly due to changing employment preferences(both by employees and employers), the number of part-time and temporary workers is rising,
especially among young and women.
Employment Insurance.

Many of them do not or cannot participate in theThis is due to the system’s underlying concept that the

Employment Insurance is security for livelihood for those who make their living with thewages received for their own labor, at the time they lose their jobs.
In response to the changing job market, the 2001 Reform of the Employment Insurance
abolished some criteria for part-time and temporary workers to subscribe: the main one ofthem is the yearly income threshold (¥900,000/year). Now part-time or temporary workers
working at least 20 hours per week, and works (or sent to work from temp agency) at a same
workplace for more than 1 year are eligible to subscribe to the Employment Insurance.

III.
1.

Current Issues
The Increase of part-time and temporary workers

There has been a continuous shift of labor force from full-time permanent employment topart-time, temporary employment, especially among the young generation and women. In
2005, the government has set the goal of shifting 0.2 million temporary workers topermanent workers per year. Training and job-matching programs were put in place andthe goal was met. In 2006, the goal of shifting 0.25 million workers has been set.

2.

Treatment of elderly employees
However, the current system still favors old age employees in many respects (Forexample, the Old Age Continuous Employment Benefits and the insured period
categorization of the Unemployment Benefits).

The assumption of the Employment

Insurance was that young people are hired easily and will continue to work full-time for theentire duration of their career.

Some researchers believe these schemes distort the labour

market. The treatment of old age employees must be re-examined closely in relation withthe labour market and also other social security systems such as pensions.

45

Outline of the Employment Insurance System in Japan

Employment Insu
1)

Eligible subscriber

2)
3)
4)

Number of subscriber **Insurer
Premium rate:

35.23 (million)
Government(General )Subscriber
Employer

5)

Short-term
special employees

General Employees

0.80%
1.15%

(for Agro-Forestry)(for Constru
0.90%
1.25%

Gov't Subsidy:
Administrative cost
Benefits paid
Unemployment BenefitsAll
1/3 of benefits, none for Employment Continuat

6)(A) Job Applicant Benefits① Basic Allowance
Requirements
AmountInsured for at least 6 months in one year prior toleaving the job
50 to 80% of pervious wage

Duration

See Table 6.1

Special One-time
Allowance: 50 day
worth of the
Basic Allowance② Skill Acquirement Allowance (1) \500/day for course fee, (2) up to \42,500 of transportation cost
③Lodging Allowance\10,700/mo④Injury & Sickness Allowance

Same as the day rate of the Basic Allowance(B) Employment Promotion Benefits (1) 30% of Basic Allowance（Ｃ） Study & Training Benefits
Requirements
Amount---Same as left,
except (1)(2)Outfit Allowance for Regular Employment(fordisabled, etc.)、moving expenses, job seeking
Those who have completed the study & training
designated by the Minister with more than 5 years of
insured period
20-40% of expense (up to \200,000)(D) Continuous Employment

Benefits①Old Age Continuous Employment Benefits
Those aged 60 to 64 year olds who have been
Requirements
insured for at least 5 years, and whose wage is lessthan 75% of the wage at 60.
15% of the wage after 60 (in case the current salaryis 60-75% of the wage at 60, the rate is reduced
Amountgradually)
Until the 65th birthday (In case re-employed after
receiving unemployment benefits, 2 years if theDuration
remaining days of unemployment benefit is morethan 200 days, 1 year, if 100 days.)②Child Care Leave Benefits
Those who has taken a child care leave to raise achild of less than 1 year old, and who have worked
more than 11 days in a month for more than 12
Requirements
months in the past two years
AmountDuration③Family Care Leave Benefits
Requirements
AmountDuration

46

40% of wage before the leave (30% during the leave,
10% after returning to work)
During the child-leave
Those who has taken a family care leave and who
have worked more than 11 days in a month for morethan 12 months in the past two years
40% of wage before the leave
Up to 3 months

---

---

---

Schemes are as of Sept 2006.

uranceSeamen's' InsuranceContinuously Employed Older
Persons

Day-Laborers

Seamen0.02
Government

0.05
Government

Left and\48～88/day\48～88/day

uction)
0.90%
1.35%

All
1/3 of benefits

tion benefits

Paid 26 days ofpremium in the past
2 months

Has been employed since before
turning 65, and till after 65, andinsured for 6 months in the year
before termination
50 to 80% of previous wage

\7,500～\4,100/day

See Table 6.3.

13～17days

---

---

---

0.90%
0.90%
All
1/4 of benefits, 1/8 of Employment
Continuation benefits
Insured for at least 6 months in one
year prior to leaving the job
50 to 80% of pervious wage
50～180days general, and 50～
330days for involuntary terminated(1) \500/day for course fee, (2) up to\42,500 for transportation cost
\10,700/mo
50 to 80% of pervious wage

Same as left, except (1) Re-employment allowance: 20～70
days of above rate
(1)(2) Moving expenses

Continuous Employment Benefits:
25% of monthly wage---

(1) Child-Leave Basic Allowance
25% * 30*Basic daily wage-----(2) Child-leave Returnee Allowance
5% * 30 * Basic daily wage
(1) Child-Leave Basic Allowance

---

---

25% * 30*Basic daily wage
(2) Child-leave Returnee Allowance
5% * 30 * Basic daily wage
47

For More Information
Relevant Organizations
National Institute of Population and Social Security Research
http://www.ipss.go.jp
Ministry of Health, Labor and Welfare
http://www.mhlw.go.jp/english/index.html
Statistics Bureau Ministry of Internal Affairs and Communications
http://www.stat.go.jp/english/index.htm
National Statistics Center

http://www.nstac.go.jp/en/index.html

The Japan Institute for Labour Policy and Training
http://www.jil.go.jp/english/index.html
International Medical Center of Japan

http://www.imcj.go.jp/

National Institute of Health Sciences

http://www.nihs.go.jp/english/index.html

National Institute of Public Health

http://www.niph.go.jp/English/index.html

National Institute of Infectious Diseases

http://www.nih.go.jp/niid/index-e.html

National Cancer Center, Japan

http://www.ncc.go.jp/index.html

National Rehabilitation Center for Persons with Disabilities
http://www.rehab.go.jp/english/index.html
National Institute of Health and Nutrition
http://www.nih.go.jp/eiken/html/index.html
National Institute of Biomedical Innovation

http://www.nibio.go.jp/english/

Radiation Effects Research Foundation

http://www.rerf.or.jp/

Social Welfare and Medical Service Corporation

http://www.wam.go.jp/

Organization of Economic Cooperation and Development

http://www.oecd.org/

Reform Monitor, Bertelsmann Foundation

http://www.reformmonitor.org

Journals

The Japanese Journal of Social Security Research
http://www.ipss.go.jp/index-e.html

AuthorAya AbeNational Institute of Population and Social Security ResearchInternational Cooperation and Research Division

We invite comments and suggestions to be reflected in future editions of thispublication.

Please send all comments to below or by e-mail: somuka@ipss.go.jp

PUBLISHED BY NATIONAL INSTITUTE OF POPULATION AND
SOCIAL SECURITY RESEARCH
2-2-3 Uchisaiwai-cho, Chiyoda-ku, Tokyo 100-0011 JAPAN
Tel: 03-3595-2984 (Direct)
国立社会保障・人口問題研究所〒100-0011 東京都千代田区内幸町２―２－３日比谷国際ビル６階
Tel: 03-5253-1111(厚生労働省代表) 03-3595-2984 (総務課)
URL: http://www.ipss.go.jp

2007(071101)