Managing Pension and Healthcare Costs in Rapidly Ageing Depopulating Countries: The Case of Japan

Abstract

In the past, families and occupational schemes on a private basis were the major old-age safety net in Japan. The principal social security pension program was introduced during the World War II. It had developed gradually under the period of high-speed economic growth. Its development looked like a dividend from economic growth. An enormous shift of the population from farmers to salaried-men took place during the rapid growth period, along with longer life expectancy. The household size has become smaller and smaller on average. The rise and the fall of private enterprises have been very common in this period. These factors forced a major source of old-age income to shift from families and occupational schemes to social security pension programs. The future demographic and economic situations of Japan will make the current, generous social security pensions hard to maintain, however. It is still an open question whether or not Japan will manage to contain the increasing social security pension cost, while assuring its people stable lives over the whole life-cycle. Social security healthcare programs in Japan are becoming very similar to those for pensions, since their basic feature is income transfers from younger and middle-aged to older people. This paper first explains changes in Japan’s social security pension programs. Second, it discusses future pension policy options in Japan. Third, it addresses healthcare issues. The final section concludes this paper.