Noda Says Still Deliberating Whether to Uphold 50% Pension Contribution

Japanese Finance Minister Yoshihiko Noda said the government hasn’t decided to maintain its 50 percent pension obligation next year after media reports said it has secured funds to meet the payouts.

“It’s difficult” to secure the 2.5 trillion yen ($30 billion) needed to uphold the government’s contribution, Noda told reporters in Tokyo today. The payout was increased from a third in fiscal 2009 under the previous Liberal Democratic Party-led administration.

A rising public debt burden and falling tax revenue is making it harder for the government to fund a pension system in one of the world’s fastest aging populations. Politicians have been using untapped budget funds to meet its obligations for the past two years and the shortage puts more pressure on them to find a more sustainable solution, including tax increases.

“We’re not at a stage where we can conduct a fundamental change in the tax system to uphold” the contribution, Noda said. He also said the government doesn’t plan to issue bonds to keep the promise and that the Finance Ministry is still deliberating the issue with the Health Ministry, which oversees pensions.

Economy Minister Banri Kaieda said the government wants to maintain the 50 percent contribution next year. Ruling party and government officials have decided that the obligation will be funded by unused transportation funds, Kyodo News reported, without citing where it obtained the information. Local media have reported that the finance ministry had proposed lowering the contribution for one year and restoring it to 50 percent the following year.

Backtracking on the obligations could result in increased premiums for individuals and also demonstrates the government’s difficulty in upholding social security benefits while maintaining its pledge to cap budget spending for three years.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net

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