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Wednesday, Sep. 21, 2011
Beefing up the middle class
As the graying of the population progresses and the birth rate hovers at a low level, cracks are appearing in Japan's social security system, including medical and nursing care services and pensions.
Prime Minister Yoshihiko Noda devoted a section of his Sept. 13 policy speech before the Diet to "the revival of a large middle class and social security reform."
He said the middle class, supported by the social security system, served as the foundation for economic development and social stability in the past and that if this class is decimated, people's resignation will turn into disappointment and then to anger, thus undermining the stability of Japanese society. His perception is correct. But unfortunately he did not spell out specific measures to strengthen the middle class.
In his speech, Mr. Noda also said he will try to nurture new industries and create employment by placing an emphasis on promotion of green energy development and the medical-related sector, and that he will make efforts to attract expertise and funding from overseas. He added that agriculture, forestry and fisheries can become growth industries to lead the new era.
But his proposals lack concreteness. The percentage of irregular workers in the total workforce is nearing 40 percent. Mr. Noda must work quickly to develop concrete measures to increase and stabilize employment, which will be the basis for strengthening Japan's middle class.
His predecessor, Mr. Naoto Kan, in June decided to raise the consumption tax rate to 10 percent in a phased manner by the mid-2010s to secure social security funds.
Since social security spending occupies more than half the budget and increases by more than ¥1 trillion each year, tax raises to pay for the costs in a long run may be inevitable. But the government must be careful about the timing of the tax raises because immediate tax raises could adversely affect the economy, which is now in bad shape.
The government should beef up social security support for younger generations, who will build future Japan. It should consider lowering social security benefits for richer elderly people.
To get people's understanding, the government must specifically show by how much their tax burden will increase and what kinds of improvement they can expect.