TOKYO -- A public uproar has forced the government to retract a controversial report claiming that retired couples reliant on public pensions also need sizable savings, but this backpedaling could further delay Japan's much needed reckoning with the overburdened program.
The report compiled by a Financial Services Agency council earlier this month showed that a household with a 65-year-old husband and a 60-year-old wife would need an additional 20 million yen ($184,000) in assets if they live another 30 years. The FSA's aim was to encourage people to start building nest eggs early, but a political storm ensued, with opposition lawmakers railing against the government for "failing the people."
Under pressure, Finance Minister Taro Aso opted for the unusual move of rejecting the report Tuesday, saying it had caused "uncertainty and misunderstanding."
Ruling party lawmakers also joined the chorus of criticism. "The anxiety about retirement has deepened among the people," Hiroshi Moriyama, the ruling Liberal Democratic Party's Diet affairs chief, said Wednesday, criticizing the report.
Many see the need for an honest debate over what to do with a public pension system faced with surging outlays as Japan's population ages. But as lawmakers realize this is a political minefield, proposed reforms that would cut current benefits to shift some of the burden away from future retirees look even less likely to gain traction.
The government's draft economic and fiscal policy released this month states that the age at which basic pension benefits begin will not be raised from 65, a change that some -- including Prime Minister Shinzo Abe -- have suggested to rein in costs.
It also calls for reviewing the system under which employed seniors receive reduced benefits. While this would remove an economic disincentive discouraging seniors from working, it would also increase spending on pensions.
Pension benefits account for 66% of the average income of those aged 65 or older, according to a Health, Labor and Welfare Ministry survey.
The uproar over the shortfall is likely to quash discussion of reworking the macroeconomic slide formula, which limits benefit increases based on rising life expectancies and declines in the number of people paying into the system. The mechanism is suspended when growth in wages and prices is slow or negative -- as has been the case for most of the time since its 2004 introduction -- meaning that later generations will bear the brunt of future cuts.
On top of this, the government is running late with its periodic examination of the future financial state of the pension system. The welfare ministry says it is still in progress, but with the ruling coalition still dealing with the fallout of the shortfall report, it is unlikely to come out before the upper house election next month.
Other possible changes, such as expanding enrollment among part-time workers to increase the number of people paying into the fund, "have gotten harder," a senior ministry official admitted.
"The FSA could have been more careful in issuing a rough numerical estimate, but the people should recognize the need to start building assets from early on," said Nana Otsuki, chief analyst at Monex.
But the political storm is unlikely to die down soon. The lower house's Financial Affairs Committee will question Aso about the report on Friday.
