Possible Crisis of Pension System

One short statement caused broad anxiety on pension system in Japan. Prime Minister Shinzo Abe indicated that benefit of public pension would be reduced, if the operation of pension fund fell in a long slump with consecutively dull trend in stock market. While Governmental Pension Investment Fund has been criticized as a gambling with pension money, Prime Minister for the first time admitted its nature of risking the people’s life. Mixed with uneasiness for the future of their economy, the Japanese people had to worry about their retired life.

In the discussion in Budget Committee of the House of Representatives, a lawmaker with Democratic Party of Japan, Yu-ichiro Tamaki, asked Abe of his idea about relationship between economic trend and pension system. “If GPIF fails in yielding profit, is it possible that pension benefit of each recipient will be reduced?” asked Tamaki.

Abe looked sober. “Without obtaining assumed profit, it will affect the payment accordingly. In the case that the system cannot afford to provide benefit, the benefit will be regulated,” told Abe. “But, we observe it in a long-term perspectives,” added Abe, “and temporary gain or lost would not be reflected to the payment.” Any sense of responsibility for losing public money could not be detected.

There were consistent skepticisms on GPIF from the beginning. The fund keeps pension money as much as ¥130 trillion, one fourth of gross domestic products of Japan. Abe administration decided to raise the ratio of stock exchange from 25% to 50% in 2014. It promoted outsourcing the operation, expecting higher return than buying low-interested Japanese national bond.

Tokyo Stock Exchange has experienced steep decline from the beginning of this year. Even how Prime Minister persuade the nation that short-term move has nothing to do with GPIF, most people feel uneasy about the future of their pension money, monthly deducted from their salary. While elder people are worried about their pension benefit, young workers are pessimistic on getting the return.

Negative elements surround Japanese economy. Affected by slowdown of world economy, Japanese economy is showing no good symptom. Japanese GDP in the fourth quarter of last year marked annual -1.4%, caused by low-level individual consumption and housing investment. Although Bank of Japan introduced negative rate policy, money seems to be going nowhere. Abe’s high-rolling economic policy might invite serious consequence.