But almost as quickly as it came, that new era is over. A scandal surrounding one of Japan's most critical problems—its drastically underfunded and byzantine public pension system—has thrown the entire government into chaos. Public outrage over lawmakers' failures to pay into the national pension system has tainted dozens of politicians, claimed the careers (at least temporarily) of some of its brightest stars, including Kan himself, and left the opposition party crippled.
Most tragically, however, this political circus has diverted attention from the real issue. Through the commotion, few noticed the passage of a "pension reform bill" last week that has virtually ensured that a radical overhaul of Japan's malfunctioning pension system won't be seriously addressed for years to come. Yet reform is vital. With a declining birth rate and a rapidly aging population, Japan faces one of the worst demographic time bombs in the industrialized world. The National Institute for Population and Social Security Research forecasts that the portion of the population aged 65 and older will rise from 17.4% in 2000 to 27.8% in 2020 while that of those aged 15 to 64 will fall from 68.1% to 60%.
Japan's national pension scheme is not equipped to address these challenges. Beyond the fact that too few workers will soon have to support too many retirees, the system is hampered by complexities that promote confusion, distrust and noncompliance. Rather than have one unified scheme, for example, Japan has three, categorized by employment status. Salaried employees and public servants are enrolled automatically, but the self-employed have to fill out forms in order to join. And those designated as "self-employed" include a grab bag of illogical participants, including some housewives, students and, oddest of all, Diet members. Although paying into the pension pool of the self-employed is technically mandatory, it is, in practice, voluntary. So many either simply decide not to pay or accidentally neglect to do so because they don't know the rules. More than 37% of 18 million self-employed workers aged 20 to 59 did not pay their required $115 monthly contribution in 2002. The result? An enormous projected shortfall. The government estimates that Japan's public pension obligations are only 35% funded.
The scandal broke on April 23 when three members of the Cabinet revealed that they had, at some point, failed to make their payments. The ministers' excuses (which were a mostly believable plea that they got tripped up in the complexity of the system they helped create) fell on deaf ears. Kan, who had been among the most vocal proponents of a complete pension overhaul, dialed the outrage up another level, castigating the Cabinet members as "the three nonpayment brothers." It was great demagoguery, but as it turned out, Kan himself had not paid into the system for 10 months in 1996. In fact, 113 members of the Diet (including seven Cabinet members) have been found so far to have been delinquent at some point. Hoping to temper the damage to the LDP with a single sacrificial lamb, Chief Cabinet Secretary Yasuo Fukuda turned in his resignation two weeks ago. Kan followed suit three days later. Late last week, Koizumi admitted that he, too, had missed a series of payments but had done so long before contributions became mandatory in 1986. Not surprisingly, the DPJ has called for his resignation, though that is unlikely.
The new bill, meanwhile, merely tinkers with the problem. Rather than make the system truly mandatory or combine the three systems into one, it has raised citizens' premiums and lowered their payouts—moves that are certain only to encourage more delinquency. Yet rather than focus on the real scandal—that Japan's citizens labor under a pension system that won't come close to providing for them—newspapers continue to call for more resignations. With the departure of capable politicians like Kan and Fukuda, the likelihood that the system will ever see real change is diminished. So much for Japan's new era of political maturity.