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Tue, Nov 18, 2003 - Page 12 News List

Japanese ministry proposes overhaul of pension program

BLOOMBERG

Japan's health ministry proposed that salaried workers raise their pension contributions at an annual growth rate of 0.35 percentage point starting next October on expectations the number of retirees will increase in coming years, the ministry said in a release of the proposal.

The ministry, which will draft legislation within the next year, also said it would freeze premiums to 20 percent of employees' salaries from 2022 on. Japanese corporate workers and their employers currently pay 13.58 percent of their annual incomes to the nation's corporate pension program.

Japan plans to overhaul its public pension system by next April to cope with the increasing burden of pensions, health care and other social programs. The number of people aged 65 or older will swell to almost a third of the population by 2025, from 18 percent in 2001, according to official estimates.

Health Minister Chikara Sakaguchi was scheduled to speak on the proposal at a press conference yesterday.

"We should really keep a close eye on how the debates will go as to how the government plans to cover the costs for rising pension costs in the future," said Eishi Yokoyama, an economist at AIG Global Investment Corp in Tokyo.

"Some say it needs to be covered by an increase in taxes," Yokoyama said.

The government estimates tax revenue this fiscal year will be ?41.8 trillion (US$382 billion), enough to fund only half of state spending, with most of the remainder covered by about ?36 trillion of bond issues. Japan's healthcare spending in the year ended March 31 reached a record 31.3 trillion.

Opponents of the plan include the Ministry of Economy, Trade and Industry, which argued the changes would be an unfair burden on workers and their companies, Nikkei English News said last week. The government alone will need roughly ?2.7 trillion to finance its contributions in the plan's first fiscal year, the Nikkei said.

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