Japanese pensions costing 10% of GDP

Payouts from Japan's public pension programmes reached a record USD 612 billion in the year to March 2010, costing more than 10 percent of nominal GDP, government figures show.

Tokyo: Payouts from Japan's public pension programmes reached a record USD 612 billion in the year to March 2010, costing more than 10 percent of nominal GDP, government figures show.

The data, released Monday, came as Prime Minister Naoto Kan makes social security reform his priority amid battles with a political opposition intent on stopping ruling party policies in order to push Kan to call a general election.

The data meant each pension recipient was supported by 1.8 people in the workforce, pressuring public and household finances, the Nikkei business daily said Tuesday.

The ratio between the pension cost and nominal gross domestic product compared with about six percent for the United States and an average 7.2 percent for countries in the Organisation for Economic Cooperation and Development (OECD) in 2005, the Nikkei said.

However, a simple comparison is difficult given disparities in government pension benefits between countries.

But Japan's ballooning welfare costs, exacerbated by a shrinking workforce and falling tax income, is squeezing an economy whose debts stands at around 200 percent of GDP, the highest in the industrialised world.

For fiscal 2009, the number of pension recipients rose 3.1 percent, or by 1.1 million people to 37 million, the welfare ministry said.

But the number of contributors shrank 0.9 percent, or 620,000, to 68.74 million, the data showed.

Amid pressure from opposition lawmakers that is expected to intensify during the 150-day parliament session that opened Monday, Finance Minister Yoshihiko Noda warned blocking current budget proposals would only hurt the public.

The Kan government has drafted a record 1.1-trillion-dollar budget proposal for the fiscal year to start from April.

Blocking the proposal "would gravely affect the lives of Japanese citizens and the economy," Noda told reporters Tuesday.

Japan's pension payouts in fiscal 2009 hit a record high of 50.55 trillion yen (USD 612 billion), up 2.8 percent from the previous year, according to the Ministry of Health, Labour and Welfare.

In the past decade, the amount of payouts jumped more than 30 percent, the Nikkei said.

Outlays are estimated to climb to 59 trillion yen in the year to March 2016 and reach 65 trillion yen in the year to March 2026, the Nikkei said.

Economists have strongly called for non-partisan efforts to rebuild the pension scheme with sustainable funding sources so that changes of governments wouldn't seriously affect the system.

In a parliamentary address Monday, Kan said the government will reveal its basic policies on reforming the social security and tax systems, including the consumption tax, by June.

Bureau Report

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