Japan: Imminently Aged: Lessons to be Drawn, Issues to Confront |

Japan: Imminently Aged: Lessons to be Drawn, Issues to Confront

20120207_Peter_Heller_w170On 7 February 2012, the Lee Kuan Yew School of Public Policy hosted a public lecture by Mr. Peter S. Keller, a visiting scholar from the School of Advanced International Studies, John Hopkins University. Keller presented a working paper on the aging population in Japan after three months of research in the country.

With Japan’s baby boomers now retiring, Keller highlighted the country’s changing demographics with a reflection on how policies were shaped and how they can be changed. Keller explores the well-known and hotly debated topic of caring for an aging population, keeping in mind lessons for Singapore.

Japan can be considered a nanny state. With a heavy social system and a unique perspective on lifetime employment, the influential and increasingly aging society benefits from subsidized health care, pension payouts and other insurance schemes. After a mandatory retirement age of 60, the Japanese are then rehired by the same contractor under a ‘seniority wage system’ earning between half and two-thirds less than their previous contract. A five-year gap separates the period between retirement and pension payouts, putting more strain on social services and the economy. Keller believes this is unsustainable, especially with the country’s large public debt at 220 percent of its gross domestic product.

One of the issues emerging from the magnitude 9, March 11 2011 earthquake in Tohoku, on the east coast of Japan was the country’s inability to respond quickly to the natural disaster and the viability of its small communities, featuring many aged 65 and above. To date, Japan has the world’s highest proportion of elderly citizens, which account for 23.1 percent of its total population. By 2050, Keller forecasts the elderly will account for 78 percent of Japan’s population, possibly shrinking the labour force by up to 40 percent in one generation.

This raises concern for the country’s long-term welfare. Currently, the younger working population is taxed to subsidize the social payouts enjoyed by the elderly, creating an inter-generational burdenwhere the young are paying for the old. While this is culturally grounded in an obligation to care, Keller questions the extent to which the burden should be undertaken by the younger generation. For him, Japan’s aging society is not just old, they’re relatively healthy and the constraints placed by the retirement age of 60, coupled with a life expectancy of 90 years, underscores the view that there shouldn’t be an enshrined age for retirement and there needs to be greater cost-sharing between the two polarized groups. 

The problem is that Japan has proven to move slowly on this politically sensitive issue. The aging society provides a key electorate and can easily influence nascent governmental policies on immigration, employment and various social schemes. In comparison to the youth, the aging Japanese society is a hodgepodge of opinion, key to the agricultural sector and other lobby groups.

Yet, change is coming. With the anticipated increase in sales tax and a ceiling rate on pension payouts, the Japanese government is engaging in a “macro-slide” burden sharing, focussing more on the poor and less on the 75 percent who can conceivably manage lower benefits. Japan is also opting for “co-pays”- a system whereby those above 65 years of age finance more of their health needs. And while things may be moving, one would be wisely counseled not to expect quick policy shifts. Japan is still hesitant about immigration, long proposed as an answer to managing an economy with an aging population, instead of relying on robotics and other infrastructural changes that help monitor and manage the old.

Nonetheless, Keller cautions that in order to tackle the issue of aging successfully, one must address the issue early, by cultivating an unrestrained and dynamic policy environment and directing focus on other social groups other than the old. He also urged the importance of Japan getting its public debt and fiscal policy right to cushion the burden of existential shocks.

The reality of the topic was not lost on the young audience when the chair, LKY professor Ora-orn Poocharoen, noted the presence of almost two-dozen local junior college students who participated. Clearly Singapore has a lot to learn from what’s going on in its region.

 

By Asha Rampersad, a Master in Public Policy Student at the LKY School.

 
Synopsis:

As Japan's baby boomers begin to retire and its population continues to shrink, Japan will be the first of the industrial countries to confront the challenges of an increasingly aged and smaller population. What lessons does Japan's approach to confronting these challenges offer to other industrial and emerging market countries? What are the principal macro and micro policy issues that still need to be addressed?

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Speaker(s):

Dr. Peter S. Heller, Paul H. Nitze School of Advanced International Studies, The Johns Hopkins University

Date:
Tuesday, 07 February 2012
Time:
12.15 p.m. - 1.30 p.m.
Venue:

Seminar Room 3-5
Level 3, Manasseh Meyer
Lee Kuan Yew School of Public Policy
469C Bukit Timah Road
Singapore 259772

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