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Sales tax hike postponement to force gov't to put off social security measures again

The government will have to push back the implementation of measures to improve the country's social security programs, including support for recipients of small pension benefits, as Prime Minister Shinzo Abe decided to put off the scheduled hike of the consumption tax from April 2017 to October 2019.

Because of this postponement, only a small part of planned measures to realize Abe's signature policy for a "Japan where 100 million people are active" will likely be instituted.

The government plans to earmark 2.8 trillion yen to measures to improve the country's social security services by raising the consumption tax to 10 percent. Currently, 1.35 trillion yen is allocated for such measures with the consumption tax set at 8 percent.

Of the measures that have yet to be implemented, those related to public pensions presuppose a consumption tax rate of 10 percent. A plan to cut back the period individuals must pay into the country's public pension system to be eligible to receive pension benefits from the current 25 years to 10 years will be shelved for the time being, along with measures to reduce the number of people who are not qualified to receive pension benefits, which require about 30 billion yen. The government will also forgo a measure that would cost about 560 billion yen to give a monthly cash stipend of up to 5,000 yen each in addition to pension benefits for low-income elderly and disabled people.

As for measures to support low-income elderly people, the fate of plans to reduce premiums for nursing-care insurance, which would require about 140 billion yen, is now up in the air. Currently, about 6.5 million people whose incomes are particularly low, even among those who are exempted from municipal residential taxes, are subject to such relief measures. The government was planning to increase the premium reduction rate and expand the scope of people eligible for such measures to include all households that are exempted from municipal residential taxes. That would have raised the number of people eligible for such relief measures by about 4.8 million.

The government had begun to implement measures to support families raising children, such as improving and increasing day care centers, when the consumption tax was raised to 8 percent. The government secured 600 billion yen for such measures in fiscal 2016, about 100 billion yen short of the 700 billion yen target it had promised.

However, as the government is also planning to rein in increases in social security expenditures, it will not be easy to increase social security spending while the consumption tax hike is put on hold. As for child care support, the government promised it would secure 400 billion yen from sources other than consumption tax revenue to ensure and improve the quality of childcare services, but the prospects even of when that will happen remain unclear.

Meanwhile, among items included in the "100 million active people plan" the government compiled on May 18, there are strong calls from both ruling and opposition parties to improve working conditions, including wages, for child care workers and caregivers for the elderly. Therefore, the government is planning to place priority on such programs -- which will require about 200 billion yen a year. The government has said it would use the "fruits of Abenomics," such as increased tax revenues, to finance the programs.

However, a senior official of the Health, Labor and Welfare Ministry said, "I wonder if tax revenues will continue to increase for 2 1/2 years until the consumption tax is raised. There is a tough road ahead."

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