Now it is Tokyo's turn. The Liberal Democratic Party approved changes March 5 to government-run pension plans aimed at ensuring their solvency for the next several decades. That is, as money flows into the system, it is paid out immediately to eligible recipients. The crux of the problem is that because the number of Japanese retirees is increasing rapidly at the same time that the working population is shrinking proportionately, a smaller pool of workers will have to support a growing group of older people. Ministry of Health and Welfare experts warn that without significant changes, public insurance premiums, which are shared equally by workers and employers, will soar to 27.6 percent of monthly pay in FY 2004 and then to 34.3 percent in FY 2025 from 17.4 percent now.
Some analysts paint a more frightening scenario.
They estimate that the burden could reach 70 percent of monthly wages by FY 2025 unless major reforms are pursued. MHW, which administers the bulk of government pension funds, has been hamstrung by strict rules on how it can invest the money. In general, the ministry is limited to very safe instruments, such as Japanese government bonds. The return on its investments, however, has been well below the rate needed to meet the expected sharp increase in payouts. To prepare for its regular five-year review of the public pension system, the ministry drew up a list of changes for Diet approval in FY 1999.