May 20, 2017 6:00 am JST

Japan may lift insurance premiums to curb child care costs

Criticism grows over welfare system that heavily favors the elderly

SHUNSUKE SHIGETA and NOBUTAKA HIRAMOTO, Nikkei staff writers

Kindergarteners walk on the streets of Tokyo.

TOKYO -- Japan will consider raising social insurance premiums in order to fund child care and education, with plans to make a decision as early as this year amid mounting pressure to better support child-rearing families in a rapidly aging society.

The government will focus on those goals in an economic plan to be finalized next month. It plans to set up a committee as early as this summer to discuss possible funding sources, as well as the feasibility of providing free higher education, among other topics.

Higher premiums were originally proposed by the ruling Liberal Democratic Party's younger members as a way to help families afford child care. They suggested increasing social insurance premiums for company employees and business owners by 0.1 percentage point, which they estimated would raise about 340 billion yen ($3.05 billion), and could fund a 5,000 yen increase per child per month to an existing government allowance for lower-income families with children.

By this calculation, a 0.5-point hike could cover a 25,000 yen increase to the monthly allowance for roughly 6 million youths not yet in elementary school, effectively making preschool and kindergarten free.

The scheme allows the current working population to share the burden of child care, instead of passing off the costs to future generations. The government will consider alternatives, like corporate contributions and tax increases. But while a higher consumption tax would raise money from the entire Japanese population, for example, any additional income from boosting the rate to 10% from the current 8% has already been allocated.

Tokyo is seriously considering the new funding sources partly because its resources are tied up in welfare benefits for an aging population. Many have criticized the government for a public assistance system that favors the elderly. Even the ruling LDP has shied away from reducing those benefits for fear of losing elections -- putting child care and education on the back burner. The new proposal could spur a debate on reining in welfare spending as well.

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