How to overcome the Silver Democracy in Japan? · Japan’s population will decline from 127...
Transcript of How to overcome the Silver Democracy in Japan? · Japan’s population will decline from 127...
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How to overcome the Silver Democracy in Japan?
December 3rd, 2014 Naohiro Yashiro
International Christian University [email protected]
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Japan’s population will decline from 127 million in 2010 to 87 million in 2060
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1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060
1000
Source: Population and Social Security Institute
Population estimates 2012.1
2002 2006 2012
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Rapid aging of the elderly
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1950 60 70 80 90 2000 10 20 30 40 50 60
Mill
ion
Source: Population and social security institute 65-74 75+ Ratio of age 65 and above(%)
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Significant inequality in net social security benefits between generations
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Japan’s social security entirely depends on deficit financing
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1975 1980 1985 1990 1995 2000 2005 2010 2013
Source: Population and Social Security Research Institute
Social security expenditures and contributions (Trillion yen)
Social security expenditures Social security contributions National bond issues SS balance
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Silver democracy: voting ratios are constantly higher for older age groups
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1989 1992 1995 1998 2001 2004 2007 2010 2013
20-29
30-39
40-49
50-59
60-69
70 and over
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Pensions and medical care for the elderly account for a large share of social security
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Political intervention prevented reducing pension benefits due to deflation
• The Pension Law requires automatic adjustments of the benefits according to price changes. But, politicians passed the special law to freeze it in case of deflation.
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2000 2005 2010 2013
Source: Ministry of Health, Lbor and Welfare
The statutory and actual level of pension benefits (1999=100)
Actual level Statutory level
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Proposals for revising the election scheme to reduce the elderly’s voice
• Voting rights should be appropriated to parents by the number of their children.
• A Diet member should be proportioned in “young bracket(20-30 year)”
“middle-aged bracket(40-50 year) ”, and “elderly bracket(over 60s years) ”.
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Who is to bell the cat?
• Any trials to reduce the political power of the elderly are likely to be rejected under the silver democracy.
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①Threatening the elderly
• The social security fund has been shrinking, and is likely to be exhausted by 2030.
• If the credibility of national bond declines, 40% of the benefits may well be cut.
• Current social security is “high risk, high return assets” for the elderly.
• By cutting the benefits by 20% now, it becomes “low risk, low return assets”.
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Credibility of government bonds will decline with accumulating debts
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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Source OECD Economic Outlook
Public debt to GDP ratios (%)
Japan
USA
EURO
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②Appealing to altruism of the elderly
• The Japanese elderly do care for their grand- children and spend on average $2400 in a year for them.
• If the elderly were well informed the current situation on significant income transfers from the grand children’s generation, they may well accept cuts in social security benefits.
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Small differences in views on social security burden sharing by age groups
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20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+
Source: Ministry of labor,Health and Welfare
Opinion poll on the social security burden sharing, 2012
Increasing burden on the working generation Increasing burden on the elderly generation
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Economic revitalization policies to address the demographic challenge
• Higher labor force participation of women and 30% target for female managers;
• Lower corporate tax rate; • Improving labor market mobility.
Growth accounting of Japan (%)
GDP Contribution ofgrowth rate Labor Capital TFP
1980-1990 4.64 0.6 2 .19 1.841991-2000 1.13 -0.48 1.2 0 .42001-2010 0.76 -0.49 0.48 0.77
Source: Mizuho Research Institute
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Reviewing the role of the Government
• Basic social security and health care provision is the governments responsibility;
• They could be combined with value added private services in the markets;
• Regulatory reform of health and nursing care provision would create production and employment as well as tax revenues.
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Summing up
• Aging of the population is gloomy for the public sector with growing expenditures;
• An increase in the elderly population implies growing markets for the private sector;
• Expanding “Silver Markets” through regulatory reform is the key to Japan’s economic revitalization.