Demographic change and social security policy responses - the case of Japan -

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1 Asian Development Bank Institute (ADBI) and Policy Research Institute (PRI) Joint Workshop Aging Population in Asian Countries and Its Impact on Fiscal Sustainability 28th March Conference Room Demographic change and social security policy responses - the case of Japan - Reiko Hayashi, Ph.D Director of International Research and Cooperation

2 Population in million Population by broad age group and aging rate, (in million) years old years old years old and older Year Projection Source : 192 to 215 by Population Census, Statistics Bureau, Ministry of Internal Affairs and Communications. 22 to 26 by Population Projections for Japan, medium-fertility and medium-mortality assumption (212) National Institute of Population and Social Security Research 45% 4% 35% 3% 25% 2% 15% 1% 5% % Aging rate (%)

3 Very quick ageing in Japan Years required for aging rate to rise from 7% to 14% France Sweden United Kingdom Australia Hungary United States Canada Spain Japan Kazakhstan South Korea Singapore Thailand China Sri Lanka Projection Vietnam India Indonesia Year Note : The year to the left of the bar designates the year in which the percentage of the population aged 65 and above (aging rate) reached 7%; the number to the right of the bar designates the year when the aging rate attained 14%. The number on the bar designates the years required for that increase. Source : Hungary by Kinsella and Wan He (29); Kazakhstan, Vietnam, India, and Indonesia calculated using UN (215) and others by IPSS (216)

4 Dependency ratio 11 1 Dependency ratio Dependency ratio = Pop Aged ~ Pop Aged Year World Japan Indonesia S.Korea Thailand China Vietnam Source : United Nations, DESA, Population Division (215). World Population Prospects: The 215 Revision, DVD Edition.

5 Social Security in Japan Health Insurance Pension Long term care insurance Welfare Public assistance Disability Policy to mitigate low fertility Labour insurance

6 Universal Pension Coverage (1961) and expansion Contributors in Million Number of contributors (insured, members and dependents) by pension schemes Proportion of people receiving public pension by age category Coverage % Seamen's Insurance Mutual Aid Association of Private School Personnel Mutual Aid Association of Public Corporation Employees, etc. Mutual Aid Association of Local Government Employees Mutual Aid Association of National Government Employees Agriculture, F.F. Organization Employees Mutual Aid Association Farmer Pension Fund National Pension Employees' Pension Insurance Source : Statistics Bureau (1988) Historical Statistics of Japan All age Male All age Female 6+ Male 6+ Female 65+ Male 65+ Female Source : Ministry of Health, Labour and Welfare Comprehensive Survey of Living Conditions

7 Reserve Funds of Public Pensions Trillion Yen Mutual associations of personnel of agricultural, forestry and fishery organizations Private school teachers and employees mutual aid association Local government employees mutual aid association National and Related Public Service Mutual Aid Association National Public Service Mutual Aid Association Seamen's Insurance National Pension Employees' Pension Funds Employees' Pension Insurance Social Benefit : Pension Source : National Institute of Population and Social Security Research Japanese Social Security Statistics DB Table 24, 26

8 Maximization of demographic dividend Fiscal loan fund By financial sources 25 By purposes 2 2 Trillion Yen 15 Trillion Yen Gov t guaranteed bond, gov t guaranteed borrowed money Postal life insurance and annuity Other Trust Fund Bureau National pension Welfare pension Postal savings Special account for industrial investment Source : Ministry of Finance Budgetary Statistics, fiscal year edition In Statistics Bureau (1988) Historical Statistics of Japan Trade and economic cooperation Fundamental industry Local area development Transport and communication Road National land security and disaster restoration Agriculture, forestry and fisheries Small and medium enterprises Cultural and educational facilities Welfare facilities Life environment improvement Housing

9 Pension fund operation Until 2 MHLW Pension special account Fund deposit Operation return MOF Trust Fund Bureau Loan Return of interest Fiscal Loan Fund Operation (Public works etc.) From 21 MHLW Pension special account Fund deposit Operation return Government Pension Investment Fund (GPIF) MHLW: Ministry of Health, labour and Welfare MOF: Ministry of Finance Source : Ministry of Health, Labour and Welfare n/zaisei/tsumitate/tsumitatekin_unyou/darega_unyou.html Financial Market

10 Reforms 1985 : Introduction of Basic Pension From household to individual 21 : Defined Contribution Plan 21 : Pension reserve funds operation from MOF to GPIF 21 : Abolition of Social Insurance Agency in 21 Replaced by Japan Pension Service 215: Macro Economic Slide : fixing premium and sliding benefit Transparency : Information available through internet (>< Obscurity by complexity)

11 1 Universal Health Coverage in 1961 Mutual Aid Association (Civil servant) Medical Care System for Elderly in the Latter Stage of Life Seamens' Insurance 8 National Health Insurance (Farmer, informal sector) Mutual Aid Association Coverage % 6 4 Health Insurance Managed by Government (Small company) National Health Insurance Health Insurance for Day Labourers 2 Health Insurance Managed by Association (Large company) Health Insurance - Managed by Government Health Insurance - Managed by Association Sources : Ministry of Health and Welfare (1976) Historical Statistics of Japan (Statistics Bureau), Social Security Statistics of Japan (IPSS), Takagi (1994)

12 Free medical care for the elderly from 1973 by the Partial Revision of the Act for the Social Welfare for the Elderly Number of patient per 1, population 25, 2, 15, 1, 5, Elderly =7+ Emergence of Elderly hospital Age Year Note : Number of patient is the sum of out-patient and in-patient during one day of the survey Source : Patient Survey, Ministry of Health, Labour and Welfare

13 Health and Medical Services Act for the Aged in 1983 Financing of elderly medical expenses before and after the Elderly Health System Before Owed by Insurers 82% Employer-based Health Insurance National Health Insurance Government 18% National Govt. Government 18% Local Govt. After Employer-based Health Insurance National Health Insurance Owed by Insurers 7% Employer-based Health Insurance National Health Insurance Government 3% National Govt. Local Govt. By the number of insured elderly 5% Adjusted by the national average rate of elderly 5% Source : Health and Welfare Statistics Association (1985) Journal of Health and Welfare Statistics

14 Launch of long-term care insurance system in 2 Source of financing Primary insured Aged 65+ Premium Secondary insured Aged 4-64 Subsidy National Prefectural Municipal Insurer and Operator Municipalities (Shi-Ku-Cho-Son 市区町村 ) Care-needs assessment and Care-Plan elaboration by Caremanager Copayment Operation In-home services Facility services Community -based care services Nursing care prevention services Community -based nursing care prevention services

15 Increasing expenditure medical, long-term care, welfare for the elderly 9 Thousand yen per person aged 65 and over Medical expenditure Long-term care expenditure Welfare expenditure Year Source : ESCAP (215) Long-term Care of Older Persons in Japan SDD-SPPS Project Working Papers

16 Future prospects Social Benefit 8 Trillion yen Pension Year Pension Medical Care Longterm care Welfare & Others Source : National Institute of Population and Social Security Research Financial Statistics of Social Security

17 Active ageing elderly NOT dependent Revision of Act on Stabilization of Employment of Elderly Persons Population by labour status 21 in ,5, -1,, -5, 5, 1,, 1,5, Male Employed Male Unemployed Male Housework Male Education Male Other Male Child Male Unknown Female Employed Female Unemployed Female Housework Female Education Female Other % Elderly (65+) labour force participation rate Male Female Source : Statistics Bureau, Population census Source : Statistics Bureau, Labour Force Survey

18 Increasing healthy life expectancy along with life expectancy, 21 to (84.93) Male Female (78.7) (78.64) (79.19) (85.59) (85.99) (86.3) (86.61) (79.55) (8.21) Healthy life expectancy (years) Unhealthy years (Life expectancy) Source : Health Japan 21 (the second term) Progress of each objective, Ministry of Health, Labour and Welfare, Shingikai-161-Daijinkanboukouseikagakuka-Kouseikagakuka/sinntyoku.pdf

19 5% 4% 3% 2% 1% Further reforms Elderly income security and redistribution Proportion of people receiving public assistance % Tax financed Basic pension? Raising pensionable age along with life expectancy or healthy life expectancy? Increasing irregular employment > flexsecurity and link with employment insurance Source : National Institute of Population and Social Security Research Statistics on Public Assistance

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