A social security crisis is looming for Japan, yet the administration of Prime Minister Shinzo Abe has not sufficiently discussed the issue. The seriousness of this crisis surfaced recently in preliminary calculations on the expected social security outlay for fiscal 2040.
Japan's social security spending in fiscal 2018 hit 121.3 trillion yen. This figure is expected to balloon to as high as 190 trillion yen in fiscal 2040 as the population of people aged 65 or over peaks. This means social security spending will rise by around 1.6 times. Just how is the government going to find an extra 70 trillion yen? The Abe administration must quickly come up with a mid- to long-term solution.
Preliminary calculations released at the Council on Economic and Fiscal Policy indicated that pension spending would increase roughly 1.3 times the figure marked this fiscal year to 73.2 trillion yen, while nursing care costs would rise 2.4 times to 25.8 trillion yen, and medical expenses would rise to between 66.7 trillion and 68.5 trillion yen.
Up until now, the government had only released estimates through 2025, when all members of Japan's baby-boom generation will be aged 75 or over. However, population survey figures show that the number of elderly people will continue to increase after this point.
In spite of this, the Abe administration has merely focused on Abe's economic policy mix, dubbed "Abenomics," aiming to boost tax revenues with the help of a robust economy, but it has not had substantive discussion on the increased financial burden on the public or reining in spending.
Under the administration of the former Democratic Party of Japan (DPJ), the DPJ, the Liberal Democratic Party (LDP) and the LDP's partner Komeito, previously known as New Komeito, agreed on tax and social security reforms. But while the consumption tax rate was increased to 8 percent following the subsequent transfer of power to the Abe administration, the government has twice put off plans to further raise the tax rate to 10 percent. Aging of Japan's society has progressed further over the six years since the three parties reached their agreement, and social security costs have increased by close to 9 trillion yen over this period.
At the same time, the working population is decreasing, and the shortage of workers is becoming a serious problem. According to the Ministry of Health, Labor and Welfare, Japan will need to secure about 547,000 new care workers by 2025. However, when it comes to securing the financial resources or personnel required, there is no way that Japan will be able to sustain various social security systems through the stopgap reforms have been implemented to date.
The Council on Economic and Fiscal Policy serves as a control tower that decides on the framework for the nation's economy and finances. It bears a heavy responsibility for failing to delve into social security discussion for a long time up until now.
During a meeting of the council on May 21, Prime Minister Abe went no further than commenting on measures relating to the number of hospital beds divided up by function that Japan seeks to have in place by 2025. At a time when preliminary calculations show that social security costs are expected to surge over the period up to fiscal 2040, it is unnatural for Abe to continue to speak only about policies up until 2025.
Long-term social security reforms cannot be delayed any longer.