TOKYO - The Japanese government’s long-anticipated pension reform plan is at risk of being significantly watered down, as the core proposal to raise the basic pension appears to have been dropped from the bill currently under deliberation in the National Diet.
Originally positioned as the centerpiece of the five-year pension system review, the proposed increase in the basic pension was meant to address projections showing a steady decline in future pension payouts. According to a 2024 fiscal review by the Ministry of Health, Labour and Welfare, if the current economic trajectory continues, the average pension benefit ratio—currently 60% of the average salary of 370,000 yen—will fall to around 50% by fiscal 2057.
What raised greater concern was the sharp projected drop in the basic pension, the portion of the system paid to all citizens regardless of employment history. The ministry forecast a nearly 30% decrease in basic pension value over the next three decades under typical economic growth, primarily due to prolonged deflation and the inability to lower payouts during that time. This has led to concerns that the burden of past inaction is being shifted onto younger generations.
To address this, the government initially considered supplementing the shrinking basic pension using funds from employee pension reserves, which are primarily built from contributions by company workers and civil servants. This measure, while aimed at helping all citizens, would have resulted in lower benefits for a portion of current employee pension recipients. A health ministry official noted the reform would only work if politicians could convince the public to accept the sacrifice for future generations.
However, with a House of Councillors election scheduled for the summer of 2025, ruling party lawmakers—especially those in the Liberal Democratic Party—feared voter backlash over the perceived “diversion” of employee pension funds. Facing political pressure, the government ultimately removed the basic pension hike from the bill.
Commentators have criticized the retreat, arguing that political short-termism is undermining efforts to make the system sustainable amid an aging population. Inoue, the anchor moderating the discussion, pointed out that while everyone understands the reforms would involve some pain, political leaders appear unwilling to confront voters with hard truths ahead of elections.
TBS political analyst Hoshi observed that the proposal would have raised national pension payments—often collected from self-employed individuals, who tend to support the LDP—while reducing benefits for company workers, who are typically less partisan. He noted this dynamic made the plan politically sensitive.
With current prices rising, many retirees depending on national pensions—approximately 60,000 yen per month—face increasingly difficult living conditions. Yet the reforms needed to support them have now been delayed.
Even alternative funding methods, such as extending the contribution period for basic pension eligibility from 40 to 45 years, were ultimately shelved due to concerns about increasing the long-term burden of social insurance payments.
The failure to secure a basic pension increase is expected to hit the so-called “employment ice age generation” the hardest. These are people who graduated during the post-bubble economic slump and struggled to find stable jobs, often lacking sufficient employee pension contributions. As a result, many rely heavily on the basic pension in retirement.
Support for this demographic was a key rationale behind launching pension reform in the first place, and critics argue that abandoning the core proposal now only further postpones meaningful solutions.
Source: TBS
