International Comparisons
Interview with Dr. Noriyuki Takayama
Director of the Institute of Economic Research at Hitotsubashi University, Tokyo, Japan / News Release
October 3, 2005
Our conversation with Dr. Takayama revolved around the recent national elections in Japan, which resulted in a landslide victory for Prime Minister Junichiro Koizumi’s Liberal Democratic Party (LDP) on September 11, 2005.
In response to a failed attempt to pass a bill through the Diet, designed to privatize the Japanese postal service, Koizumi dissolved the lower house and called a snap election in August. The postal reform bill was Koizumi’s priority legislation and it was defeated largely as a result of opposition within his own party. The bill sought to privatize Japan’s post office, which doubles as a financial services organization, life insurance provider, and lender, and whose savings make it the world’s largest bank. This massive public institution has been associated with pork-barrel politics; for, Japanese politicians have long used its reserves to fund public projects, often favoring well-connected contractors.
Deriding critics in his own party and in the main opposition Democratic Party of Japan (DPJ), Koizumi campaigned on this single issue, convincing voters that reform of Japan Post is the necessary first step to further reform of the countries’ strained health care and pension systems and inflated public spending. His message resonated with the public and the LDP came away with a two-thirds majority in Japan’s lower house and delivered a crippling blow to the DPJ.
GAP: Mr. Koizumi’s overwhelming victory seems to have given him a clear mandate for postal reform, but is it the key ingredient, as he’s suggested, to further reform to the countries’ health care and pension systems?
NT: Absolutely yes.
GAP: The public seems to be really attracted to the personal characteristics of Mr. Koizumi. He’s truly brought a face and character to the dominant party. What happens when he steps down next year? Will another leader be able to carry Koizumi’s momentum and push for further reform?
NT: It depends on the characteristics of the next leader. I am personally afraid the next leader will be unable to do so. Mr. Koizumi’s overwhelming victory is sure to induce a rash of big reforms within a year. Discussions in the parliament will be just a ceremony without enough explanations of the reform necessities provided. This may build up dissatisfactions against government commitments among the majority of people in Japan.
GAP: The Japanese public is very concerned about its pension and health care systems, both billions of dollars in deficit. What are the most important elements that reforms of the health care and pension system will have to address in order to deliver sustainable and adequate systems?
NT: The coverage of social security health care services will be narrowed. The “hotel charges” with meal expenses are most likely to be excluded. The co-payment will be increased, as well, from current 10% to 20-30% for the elderly. The normal pensionable age will be increased from 65 currently to 67 or 68 in the near future.
GAP: Another issue related to pension reform is the concern over future labor shortages brought by an aging workforce. What does Japan need to do to alleviate this coming shortage? Are businesses and the public ready to work/employ longer?
NT: A drastic change in immigration policies will come soon, to invite the massively increasing number of potent and skilled workers from other Asian countries. The average retirement age of the male workers in Japan is among the highest in developed countries, and thus there will be little room for them to work longer.
GAP: Are there any companies or initiatives that have been especially successful in promoting, retaining and retraining older workers?
NT: Generally speaking, my answer is “No”. There are exceptional companies, however, that are successful in doing so, such as Yokogawa Electric Corporation and Fuji Electric Co. Ltd.
*Japanese companies are legally permitted to set mandatory retirement ages for employees older than 60 years of age. Recognizing the looming labor shortages, some companies have implemented policies to extend mandatory retirement ages or rehire workers who had previously retired.
GAP: Some pundits have suggested that the demise of a potent opposition party may contribute to a stalling of necessary reforms. Do you think this may become the case?
NT: I don’t think so. A rash of necessary reforms other than the postal one will take place very soon with the initiative of bureaucrats.
GAP: Why couldn’t the DPJ get any traction by promoting large scale and very specific reforms to pension, public spending, postal reform, while Mr. Koizumi primarily discussed Postal Reform?
NT: The personal attractiveness of the main cast in each party was quite different in the “political theatre” of Japan, this time. Mr. Okada, the former DPJ leader was very honest and earnest, but lacked politically passionate appeals.
The views expressed in this article do not necessarily represent the views or policies of AARP.
Dr. Takayama is an internationally recognized expert in intergenerational economic issues, with specialization in the economics of public and private pensions and of household saving and wealth formation. He has published numerous books and articles in international publications and was awarded the 1996 Nikkei Prize for the best book on economic issues.
Currently directing the Institute of Economic Research with the Hitotsubashi University in Tokyo, he has previously served as an expert member on national advisory committees on pensions, tax, gender equality, minimum wage and statistics and has worked as a consultant at the World Bank, European Commission, IMF, and OECD. He has also served for four years as Editor-in-chief of Economic Review and is presently a member of the Editorial Advisory Board of the International Social Security Review.