How to overcome the Silver Democracy in Japan? December 3 rd , 2014 - - PowerPoint PPT Presentation

How to overcome the Silver Democracy in Japan?

December 3rd, 2014 Naohiro Yashiro International Christian University yashiro@icu.ac.jp

2

Japan’s population will decline from 127 million in 2010 to 87 million in 2060

80000 85000 90000 95000 100000 105000 110000 115000 120000 125000 130000 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 1000 Source: Population and Social Security Institute

Population estimates 2012.1

2002 2006 2012

Rapid aging of the elderly

5 10 15 20 25 30 35 40 45 1950 60 70 80 90 2000 10 20 30 40 50 60 Million Source: Population and social security institute

65-74 75+ Ratio of age 65 and above(％）

Significant inequality in net social security benefits between generations

4

Japan’s social security entirely depends on deficit financing

5

20 40 60 80 100 120 1975 1980 1985 1990 1995 2000 2005 2010 2013 Source: Population and Social Security Research Institute

Social security expenditures and contributions (Trillion yen)

Social security expenditures Social security contributions National bond issues SS balance

Silver democracy: voting ratios are constantly higher for older age groups

20 30 40 50 60 70 80 1989 1992 1995 1998 2001 2004 2007 2010 2013 20-29 30-39 40-49 50-59 60-69 70 and over

Pensions and medical care for the elderly account for a large share of social security

Political intervention prevented reducing pension benefits due to deflation

• The Pension Law

requires automatic adjustments of the benefits according to price changes. But, politicians passed the special law to freeze it in case of deflation.

95 95.5 96 96.5 97 97.5 98 98.5 99 99.5 100 2000 2005 2010 2013 Source: Ministry of Health, Lbor and Welfare

The statutory and actual level of pension benefits (1999=100)

Actual level Statutory level

Proposals for revising the election scheme to reduce the elderly’s voice

• Voting rights should be appropriated to

parents by the number of their children.

• A Diet member should be proportioned in

“young bracket（20-30 year）” “middle-aged bracket（40-50 year） ”, and “elderly bracket（over 60s years） ”.

Who is to bell the cat?

• Any trials to

reduce the political power of the elderly are likely to be rejected under the silver democracy.

①Threatening the elderly

• The social security fund has been shrinking,

and is likely to be exhausted by 2030.

• If the credibility of national bond declines,

40% of the benefits may well be cut.

• Current social security is “high risk, high

return assets” for the elderly.

• By cutting the benefits by 20% now, it

becomes “low risk, low return assets”.

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Credibility of government bonds will decline with accumulating debts

50 100 150 200 250 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source OECD Economic Outlook

Public debt to GDP ratios (%)

Japan USA EURO

②Appealing to altruism of the elderly

• The Japanese elderly do care for their

grand- children and spend on average $2400 in a year for them.

• If the elderly were well informed the

current situation on significant income transfers from the grand children’s generation, they may well accept cuts in social security benefits.

Small differences in views on social security burden sharing by age groups

5 10 15 20 25 30 35 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ Source: Ministry of labor,Health and Welfare

Opinion poll on the social security burden sharing, 2012

Increasing burden on the working generation Increasing burden on the elderly generation

Economic revitalization policies to address the demographic challenge

• Higher labor force participation of women and

30% target for female managers;

• Lower corporate tax rate;
• Improving labor market mobility.

Growth a h acco ccount unting ng o

• f J

Japan ( n (%) %) GDP Con

• ntribution
• n of
• f

growth th r rate te Labo bor Capital TFP FP 1980-1990 1980-1990 4. 4.64 64 0.6 .6 2. 2.19 19 1. 1.84 84 1991-2000 1991-2000 1. 1.13 13

• 0.
• 0.48

48 1.2 .2 0.4 .4 2001-2010 2001-2010 0. 0.76 76

• 0.
• 0.49

49 0. 0.48 48 0. 0.77 77 Sour urce: ce: M Mizuho uho R Res esea earch I ch Ins nstitut ute

Reviewing the role of the Government

• Basic social security and health care

provision is the governments responsibility;

• They could be combined with value added

private services in the markets;

• Regulatory reform of health and nursing

care provision would create production and employment as well as tax revenues.

Summing up

• Aging of the population is gloomy for the

public sector with growing expenditures;

• An increase in the elderly population

implies growing markets for the private sector;

• Expanding “Silver Markets” through

regulatory reform is the key to Japan’s economic revitalization.