Pension Reform Bill Goes to the Diet

Shigeru Ishiba Cabinet made a decision for pension reform and submitted related bill to the Diet on May 16th. While the government encourages low-income individuals to be covered by employee’s pension insurance (EPI), it dropped a policy to raise pension benefit of National Pension System (NPS), receiving concerns from ruling Liberal Democratic Party. The opposition parties strictly oppose that decision, making parliamentary procedure unsure.

The bill included removal of “the wall of 106 million yen.” In the current pension system, a worker with annual income of 106 million yen or more needs to pay for EPI pension premium. There are some workers, mostly part-time employees, who halt their working before their income goes beyond annual 106 million yen, because they will need to pay for the premium if they exceed the threshold.

 

The bill requires all the workers to pay for the EPI premium, regardless their annual income. Although low-income workers will need to pay for the premium, they will be covered by EPI to receive benefit in addition to the NPS. The wall of 106 million yen is applied to the workers for a company with 51 employees or more. Although the workers for smaller company have another wall of 130 million yen, the government is going to mitigate it with subsidies.

 

The Ministry of Health, Labour and Welfare (MHLW) proposed to raise benefit for NPS, using reserve fund of EPI as financial resource. The LDP, however, strictly opposed that idea, because it was obvious that salaried workers who have been paying for EPI would be frustrated with that pension reform. For the LDP, it is crucial not to get those voters angry, considering the negative impact on coming Upper House election in July.

 

There is a generation called “employment ice age,” who graduated college in 1990s and 2000s after burst of bubble economy. They are expected to receive less pension benefit than other generations, because they have not paid much pension premium when they missed job opportunity.

 

The opposition parties criticized the decision of Ishiba Cabinet, which was affected by LDP’s interest, demanding enough care for the employment ice agers. “It is red beans roll bread without red beans paste in it,” said the leader of Constitutional Democratic Party of Japan, Yoshihiko Noda. His words can be interpreted as, say, “hamburger without meat.” His party is going to submit its own bill with a policy to help the people with less benefit.

 

The LDP has a dilemma. If they help the ice agers, they will face anger of salaried workers. If they do not help, the pension system does not work well for the people with low benefit. If they spend more time, they will be criticized as being irresponsible for pension reform. Considering the fact that the leading coalition does not have simple majority in the House of Representatives, it is unsure whether the bill passes the Diet by the end of the term on June 22nd.

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