Evidence from Eleven Countries
Edited by Giuliano Bonoli and Toshimitsu Shinkawa
Chapter 8: The Politics of Pension Reform in Japan: Institutional Legacies, Credit-claiming and Blame Avoidance
Toshimitsu Shinkawa INTRODUCTION As suggested in the introductory chapter, Japan can be classified as a member of the Bismarckian Lite category of pension systems, together with Canada and the United States. Contrary to these two countries, however, Japan faces a serious challenge to pension sustainability. What is responsible for such a contrast between Japan and the other two countries? The generosity of Japan’s public pensions as compared with the other two countries contributes partially to its fiscal tightness, but cannot explain the degree and extent of its crisis, since the earnings replacement ratio of public pension in Japan is substantially lower than in social insurance countries.1 It is true that Japan is ageing much more rapidly and will be one of the most aged societies in the world within the next two decades, but it should be remembered that pension retrenchment started in Japan as early as the 1980s, when its ageing ratio (the ratio of aged 65 and over to the whole population) was relatively low (9.1 per cent in 1980 and 12 per cent 1990). Pension reform is brought to the political agenda in Japan almost every five years in mandatory actuarial revaluation. Before 1985, pension reform meant the expansion of pensions, or raising the benefit level with minimum increases in contributions. In the 1985 reform, however, the government reversed the trend by tightening the relationship between benefits and contributions. Most noteworthy is that reducing the benefit level was authorized for the first time in Japanese pension history.2...
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