After several years of intense negotiations, the ruling Democratic Party of Japan was able to push through a bill that will raise the Japanese consumption tax from its current level of 5% to 8% in 2014, with a further increase to 10% a couple of years later. While I’m no fan of paying more taxes, I believe that something needs to be done to improve Japan’s financial situation, already in bad straights and now needing to pay for the recovery of Tohoku after last year’s earthquakes and tsunamis. The other day I caught an interesting show in which Japanese director Beat Takeshi lead a round-table discussion featuring politicians, writers and other smart people as they debated the financial issues Japan faced going forward, including the crisis of people not making their National Pension payments. Japan has two pension systems, “Social Insurance” (shakai hoken) for employees at larger companies, and National Pension (kokumin nenkin) for workers at smaller companies and self-employed. In one of the biggest blunders by a modern government ever, employees covered under the National Pension system are “required” to make their pension payments…but since the money is not deducted by employers like Social Security is in the U.S. and there’s no actual enforcement for non-payment, a full 41% of Japanese who should be making their pension payments are not. This is a crisis not only for the individuals in question but also for Japan at large. I hope they can come up with some good solutions.
Japan is trying to fix its National Pension system with attractive graphics like this.