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Koizumi Cabinet E-mail Magazine No. 146 (July 1, 2004)

[Lion Heart -- Message from Prime Minister Junichiro Koizumi]
(Provisional Translation)

Prime Minister Junichiro KoizumiProfile

Pension Reform

Junichiro Koizumi here.

I have received messages from many readers on the pension reform. There were many voices of concern and strong dissatisfaction expressed that the bills on pension reform were not given sufficient deliberation before adoption; that pension premiums are used in a wasteful manner; that nonpayment by Cabinet and Diet members is wrong. There were also concerns expressed about whether it will actually be possible to receive pension benefits in the future.

As I have mentioned in a previous issue of this e-mail magazine, I stand by my belief that the basic principle of the pension system is intergenerational support. In the old days, children sent money to their parents. Nowadays however, I doubt that there are many in their 20s and 30s who send money out of their salary to their parents.

In place of children sending money to their parents, the pension system was designed so that each member of the younger generation pays a monthly pension premium. Then when they reach their parents' age, they start receiving benefits. If they are under the employees' pension plan, they will receive monthly benefits of around 200,000 yen.

The monthly premiums are not the only source of funding for the pension system, since tax money is also injected. That is why the pension system has a higher yield than any other type of savings.

Once, average life expectancy was said to be 50 years, and around 2.7 million babies were born per year. We now expect to live more than 80 years. At the same time, the number of newborn babies per year has now fallen below 1.2 million.

As the decrease in birthrate and the aging of society progresses, we will face a situation in which the number of beneficiaries of the pension system increases while that of people paying into it steadily decreases. Naturally, everyone would like to give less and receive more. However, in the real world, such dreams do not come true.

Until the bills on pension reform were enacted in the last regular Diet session, the system had been reviewed every five years. However, voices were raised that this conventional approach left uncertainty about the future of the pension system and people expressed their unease. Against such a backdrop, the pension system was reformed to make it sustainable, by setting a ceiling on the amount of premiums to be paid into the employees' pension plan in the future at 18.3 percent and the minimum amount of benefits when they start being received at 50.2 percent of the average income of the current working generation.

Had these bills not been enacted, the premium for the employees' pension plan would have had to be raised to around 30 percent, failing which the total deficit of the employees' pension plan and the national pension plan would soar to eight trillion yen in five years.

Through Diet deliberations, pension premium usage, the issue of nonpayment and that of the Social Insurance Agency were brought to our attention.

There are those who are urging a hike in consumption tax to ensure a funding base of the pension system in the future.

However, I believe that during my tenure in office, which will be for another two years at most, we are not likely to see an environment that would support a consumption tax increase hike. I certainly welcome discussions about the consumption tax. Once more, I would like to emphasize that within the next two years the environment will not be one in which consumption tax could be raised. Instead, we shall look into the many other outstanding issues, including elimination of wasteful use of funds.

Greenpia and other recreational and sports facilities were constructed using pension premiums. The idea behind this was that since it would take time for those paying the premiums to start receiving benefits, there should be some merits for the premium payers as well. During the late '60s and early '70s, both ruling and opposition parties urged the government to construct such facilities by adopting supplementary resolutions in the Diet. When I was serving as Health and Welfare Minister, I was the first to raise the question as to whether it was necessary for the state to build such recreational facilities using pension premiums, when they could just as well be built by the private sector. Accordingly, I proposed that this practice be abolished.

Today, I am steadily continuing in the same direction.

I will also institute reform of the Social Insurance Agency. To ensure that nonpayment and nonparticipation do not occur and that pension funds are not used in a wasteful manner, I will advance fundamental and far-reaching reforms, inviting many people from the private sector to assume the top post as well as various other posts in the Social Insurance Agency.

The current pension system is complex in structure. It comprises many elements in a complicated structure that includes the basic pension obligatory for everyone, the employees' pension for salaried workers in the private sector, the mutual aid pension for public service employees as well as the corporate pension unique to each corporation. Therefore, aiming to realize a pension system that is easy-to-understand and secure, we must advance reform towards the goal of unifying the pension plans. It is also important that we carry out this reform on a scale that goes beyond pensions alone, comprehensively considering the social security system as a whole, including the medical care and long-term care systems.

On this point, in the last regular Diet session, the three parties of the Liberal Democratic Party, New Komeito and the largest opposition party the Democratic Party of Japan agreed that both ruling and opposition parties would consult to comprehensively review the social security system as a whole, including the issue of the unification of pension plans. I am now calling on other parties to start such consultations as soon as possible.

Since the pension system will remain with us over the next 30, 40 or 50 years of our lives, it has to be sustainable and reliable. Even in the event that the political administration were to change, the pension system should not be affected in a major way. It is with such an understanding that the ruling and opposition parties must cooperate as they review the pension system, including the pension plans unification issue.

Solemnly taking on board the criticisms leveled by the people of Japan, with eyes set firmly on the future, I will endeavor to create a sustainable pension system.

On June 28, sovereignty in Iraq was formally handed over to the Iraqi Interim Government of the Iraqi people.

Japan immediately recognized the new government and relations were established between the two countries.

The reconstruction of Iraq is now about to start in earnest. In order that the people of Iraq can without delay reconstruct their country themselves, Japan will continue to provide appropriate cooperation, which the people of Iraq will remember in the future as being the hand of assistance lent to Iraq at its crucial time for the reconstruction of their nation.

* The title of this column "Lion Heart" is a reference to the Prime Minister's lion-like hairstyle and his unbending determination to advance structural reform.

[What's up around the Prime Minister]

- Prime Minister Koizumi received a report from the Japanese Team of International Peace Cooperation who had returned from East Timor (June 30, 2004)
Prime Minister Koizumi shook hands with each and every member of the team who conducted activities for maintenance and repair of roads, bridges and other infrastructures in East Timor.

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General Editor: Prime Minister Junichiro Koizumi
Chief Editor: Deputy Chief Cabinet Secretary Seiken Sugiura
Publication: Cabinet Public Relations Office
1-6-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8968, Japan

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