And the potential tax hike is only a sneak preview of the burdens to come as Japan grows into the world’s grayest society, a nation where two decades from now seniors will outnumber children 15 and younger by nearly 4 to 1.
Economists and government officials say that Japan, in the coming years, will probably raise the retirement age, again increase taxes and trim spending on everything from education to defense, all to care for its elderly.
Young Japanese — those entering the workforce amid two decades of stagnation — will face the greatest burden: They will earn less in real terms than their parents, pay higher pension premiums, receive fewer social services and, eventually, retire with a less-generous pension package.
And that’s the best-case scenario, experts say, possible only if a notoriously fractious government succeeds in pushing through a series of unpopular measures.
Decades of good policy “can avoid a crisis,” said Masatoshi Katagiri, an economist at Chuo University, but living standards will erode. “Either way,” he said, “it will be gloomy.”
As it rose into an economic power after World War II, Japan created a generous social security net, with a universal health-care system and a universal pension system in which people were covered as employees or via a basic national program. But since the collapse two decades ago of the real estate and stock market bubble, the foundation of that system has started to crack. Tax revenue has dropped amid deflation, forcing Japan, whose debt-to-GDP ratio is highest among developed countries, to fund its social programs with more and more borrowing.
Meanwhile, Japan must come up with more and more money. This year, Japan will devote about 29 percent of its 90 trillion yen ($1.12 trillion) budget toward social security, its greatest single expenditure. Every passing year, according to government projections, Japan will need to raise an additional 1 trillion yen as it becomes the world’s most top-heavy society. All while the workforce shrinks in this country of 127 million.
“The ground on which social security stands is now shaking,” Noda said at a town meeting here this month.
Japanese government officials have held a series of such meetings across the country, but Noda delivered the pitch here in Nishinomiya, a town wedged between Osaka and Kobe in Japan’s industrial heart.
Speaking to an audience of 200, Noda said Japan needed to double its consumption tax rate by 2015, a move that critics say could stall a tenuous economic recovery.
Noda described Japan’s problem in visual terms. In 1965, Japan had 9.1 workers for every retiree, and the social security system, he said, operated like a “douage,” a sports celebration where a team tosses the coach into the air. By 2050, though, two in every five Japanese will be 65 or older. The country will have one worker for every retiree, meaning that those celebrations will look instead like “kataguruma,” or piggyback rides.