[Future Japan 2030 - Where is Japan Headed After Abe?] III. Sustainability and Future Direction of Japan's Welfare Policy

Editor's Note

As the third report in the "Future Japan 2030" special commentary series, a working paper by Professor Sungjo Kim of Soonchunhyang University, which analyzes Japan's declining birthrate and aging population and forecasts the future path of its welfare policies, has been published. In this paper, the author examines variables such as demographic changes, shifts in technology and labor, the legacy of existing welfare programs, and welfare finance, and proposes future directions for Japan's social welfare policy. The author argues that while pension system finances will increase, welfare expenditures will also rise, and as social insurance premiums reach their limits, the proportion of taxes will increase. Furthermore, the author explains that while the Liberal Democratic Party's past "politics of reward" targeting the elderly is gradually shifting towards policies for the working generation, these efforts will also proceed "gradually under silver democracy." By examining these social issues, the author predicts that the shift in Japan's welfare policy direction will be slow despite the rapid advancement of aging and declining birthrates.

※ The following is the introduction to this working paper. For the full text, please refer to the attached file below.

I. Introduction

Japan's rapid aging has led to an increase in social security costs, making Japan's finances more vulnerable. While Japan's working-age population is significantly declining, the elderly population, particularly those aged 75 and over, is increasing. Japan's population decline is progressing alongside rapid, high aging. One in four citizens is elderly, and if the current situation continues, the aging rate is projected to reach an unprecedented 40% by 2060 (Ministry of Health, Labour and Welfare 2015, 2). Japan faces a crisis of population decline and aging that no other country has ever experienced.

This rapid decline in birthrate and aging is accompanied by a comprehensive socioeconomic crisis affecting a nation's economy, society, finances, and social security. Social security systems, in particular, rely on intergenerational fiscal transfers as a key premise, so the declining birthrate and aging phenomenon will trigger numerous challenges, including increased benefits and a greater burden on the working generation in various systems such as pensions, healthcare, and long-term care (Ministry of Health, Labour and Welfare 2016, 4). Furthermore, as of the end of 2017, Japan's central and local governments' long-term debt balance was 236.6% of GDP, the highest in the world, indicating a fragile fiscal stability (IMF 2018). Although various reforms have been implemented, as the population continues to decline significantly, it may become difficult to secure the sustainable operation of these systems. The demographic changes are particularly impacting rural areas. In these regions, population decline is more severe, leading to a rapid hollowing out of the economy (Kim Yong-min 2013). Rural areas are also facing difficulties in securing personnel for healthcare and long-term care, making it challenging to provide necessary services (Ikegami Naoki 2014, 43). This situation creates a vicious cycle that further exacerbates the decline of the rural population, ultimately threatening the very operation and survival of local governments.

This study aims to predict the trajectory of Japan's social welfare policies in 2030 by examining several key variables, including demographic changes, shifts in technology and labor, policy feedback from existing welfare programs, the sustainability of welfare finance, and changes in values. Based on this, it will present the challenges and future changes in Japan's social welfare policies. Predicting the direction of Japan's social policy is directly related to the issues that Korean society is facing or will face. South Korea's welfare state is highly likely to follow a different path than the Nordic countries, which have reached a mature stage; rather, Korea shares the most similarities with Japan's socioeconomic system. Therefore, Japan's experience can offer significant insights, and by examining these issues, it is expected to contribute greatly to diagnosing crises in Korean society and presenting alternatives and visions for the future.

This study, with the aforementioned objectives, is structured as follows. First, it analyzes the key variables necessary for exploring the trajectory of Japan's social welfare policies in 2030. In the next chapter, based on this analysis, it examines the direction of Japan's social policy. Finally, it will present the implications of this study.

■ Author: Sungjo Kim_ Professor, Department of Social Education, Soonchunhyang University. He graduated from the Department of Korean History at Korea University and obtained a Ph.D. from the University of Sheffield, UK, with a comparative study on the political dynamics surrounding welfare reform in Korea and Japan. His main research areas include comparative politics, Japanese politics, and welfare politics. His recent publications include "The Politics of Revising Article 9 of the Japanese Constitution: Focusing on Prime Minister Abe's Constitutional Revision Strategy" <Peace Studies> (co-authored, 2019), "Japan's Pension Reform and Party Politics: Focusing on the Case of the 2004 Pension Reform" <Korean Political Science Review> (2018), and "The Political Dynamics of Japan's Elderly Healthcare Reform" <Korean Political Research> (2017).

■ Contact and Editing: Seiyoung Kim EAI Research Fellow

Inquiries: 02 2277 1683 (ext. 208) sykim@eai.or.kr

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Attachment: [Future Japan 2030] Sustainability and Future Direction of Japan's Welfare Policy_Sungjo Kim_Final.pdf