AGEING SOCIETY in JAPAN – PART I
By Ichiko Fuyuno
Senior science and innovation officer
The British Embassy, Tokyo
August 2007
Tel. 81-3-5211-1325, Fax.81-3-3230-4800
email: ichiko.fuyuno@fco.gov.uk
INDEX
EXECUTIVE SUMMARY ……………………………………………………………………..3
1.OVERVIEW – FACTS & FIGURES ……………………………………………………… 3
1.1. Population Trend
1.2. Concerns on Health, Labour Productivity
1.3. Financial Burdens
2.GOVERNMENT’S POLICIES ON AGEING SOCIETY …………………………………8
3. THE LONG-TERM CARE INSURANCE SCHEME AT A GLANCE ………………….9
3.1. Background – Why Is It Needed?
3.2. How Does It Work?
3.3. Rising Costs
3.4. Controversial Reforms
4. CONCLUSION ……………………………………………………………………………… 12
The information in this document is believed correct at the time of distribution. However, HM Government
accepts no liability for any loss or damage incurred as a result of any inaccuracies, however caused.
All reports by S&I Section in the British Embassy Tokyo can be found at
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EXECUTIVE SUMMARY
Japan’s economic power, advanced medicinal technology and healthy diet have
enabled its people to have the longest life expectancy in the world – by 2015 one in
four Japanese will be 65 or older. However, on the backdrop of the falling birthrate, the
overall population is shrinking and the longevity is causing serious structural problems
in a country that is already ageing at a faster pace than any other developed country1
.
Over the past several years, the Government has set the ageing-society as one of the
biggest issues to tackle, and introduced various policies and legal reforms. In 2000, it
also launched the Long-Term Care Insurance (LTCI) scheme, which aims to share the
nursing-care of the elderly across the society and reduce the burden on families.
Still, problems remain firm: the shrinking working-age population and swelling
social-welfare expenses are squeezing the Government’s finances, and people are
increasingly worrying about their future on the gloomy outlook of social-welfare and
employment situations. Critics say the LTCI scheme is causing adverse effects for the
elderly amid a rapid increase in the number of care recipients. The Government is
scrambling to improve the functions of the insurance and other schemes, but there is
still a long way to go to achieve its ultimate goal – a sustainable society where people
can live their entire lives with a sense of security.
This report discusses problems and future prospects of Japan’s strategies to deal with
the ageing society, providing an overall picture of the changing social structure in the
country.
1. OVERVIEW – FACTS & FIGURES
1.1. Population Trend
Until the early 1980s, the pace of ageing in Japan was slower than US and Europe, and
only less than 10% of the population was the elderly aged 65 or older. But the
percentage started to surge after that, and in 2005 Japan became the fastest-ageing
society, exceeding Italy, according to the Government data released in July this year.
Japan’s elderly population is expected to reach 26% (33.8 million) of the total by 2015
1
This is based on the Japanese government’s projection. But the Korean government says their
country is already the fastest-ageing society, exceeding Japan.
3
and 40.5% (36.4 million) by 2055 (Fig.1).
Figure 1: Trends in the percentage of the elderly in the world (Source: Cabinet
Office “The Status of Ageing and Implementation of Measures for Ageing Society in FY
2005”)
The US and many European countries began ageing much earlier in the 1930s, when
a shift from high to low rates of birth and infant mortality occurred, and since then the
pace of ageing has been relatively milder. In Japan, such social transformation
emerged soon after World War II, when the first baby-boom generation was born.
Therefore, Japan is ageing at a faster pace than other developed countries recently.
In 1949, the number of children a Japanese woman gives birth to in her lifetime stood
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at an average 4.32, but it fell to 2.22 in 1955, 2.16 in 1971 (the recent peak due to the
second baby boom) and plunged to 1.32 in 2006 (Fig.2). The low birth rate is
attributed mainly to late marriage and couples’ reluctance to have children, causing
the population shrinkage that began in 2005. The 2006 figure rose slightly from 2005,
but didn’t show a clear sign of turnaround. By 2055, Japan’s current 127-million
population is likely to decline to 90 million.
While the total population is getting smaller, the elderly population is growing every
year and will likely exceed 30 million by 2012, when first-generation baby boomers
turn 65, and reach its peak of 38.63 million in 2042. The average life expectancy is
also rising – from 67.75 years in 1955 to 85.52 years for women in 2005, and from
63.60 years to 78.56 years for men. It is forecast to go higher to 83.67 for men and
90.34 years for women by 2055. As of 2005, the number of people aged 100 and over
marked a record 25,000.
Figure 2: Trends in number of births and fertility rates (Source: Cabinet Office)
1.2. Concerns on Health, Labour Productivity
The longer people live, the greater risk they have of becoming bed-ridden, suffering
from dementia or other health problems. In 2005, the number of the elderly in need
of nursing-care stood at 4.17 million, up from 2.8 million in 2000 and accounting for
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16.6% of the total elderly. The number is expected to top 5.2 million by 2025. One in
two people seeking nursing-care has dementia, so the number of patients with this
disease is likely to increase rapidly. But currently, the biggest cause that leads the
elderly to seek the help of nursing-care is cerebrovascular diseases, although cancer
is the main factor of Japanese death.
Obviously there is much need for solid social-welfare systems to support the elderly,
but the fewer number of children and longer life are causing structural problems.
Already, the population pyramid has become highly unbalanced, as the population of
youth (aged 0-14) continued to decline from 35.5% of the total in 1950 to 13.6% in
2006. In contrast, the elderly population (65-) has risen from 4.9% to 20.8%. The
working-age population (15-64) once rose from 59.7% in 1950 to 69.7% by 1991, but
then it started falling every year to 65.5% in 2006 (Fig.3). The declining working-age
population triggers concerns about the nation’s future tax income and global
competitiveness in productivity. The Government urges employers to hire more
elderly people to make up for the shortage of skilled workers and secure their income
source.
Figure 3: Past and Future Population by 3 Age Groups (Source: IPSS)
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1.3. Financial Burdens
As the elderly population rises, medical and pension costs surge, but the number of
the labour force, who pay taxes to support the country’s welfare system, is decreasing.
As a result of policies to stimulate the economy when growth was low during the
1990s, Government debt is already the highest among developed nations2
and
continues to grow. Faced with growing spending pressure due to ageing, the
Government must either secure additional revenues to offer high-quality public
services or cut back on services.
The overall social welfare expenses (pension, medical and other welfare spending)
stood at 89.8 trillion yen (GBP374 billion) in 2006. The figure accounts for 23.9% of
the national income, compared to 5.8% in 1970. Concerning the expenditure for the
elderly citizens only, pension benefits are the biggest expenses, accounting for about
75% of the total.
The Government’s spending on medical insurance and pension benefits is expected to
grow to 133 trillion yen (GBP554 billion) in fiscal 2025, up from 81 trillion yen
(GBP337 billion) in fiscal 2004. Its long-term, nursing care expenditure will likely
climb to 19 trillion yen (GBP79 billion) in 2025, well above the 5 trillion yen (GBP20.8
billion) in 2004 (Fig.4).
Running pension schemes soundly is a major challenge. Still, Japan is in a better
position than many developed countries. The Government boasts a healthy pension
balance for the time being through significant asset holdings. Furthermore, reforms
in 2004 cut benefit entitlements, easing pressure on the system. Under its long-term
projection, the balance of Japan’s two major pension funds – the national pension and
employees’ pension – will show a profit through 2040 or 2050 after marking a deficit
for several years until 2008 or 2009. But some critics say the projection is too
optimistic because it counts on future investment returns, tax revenues and a steady
increase in pension premiums3
, all of which depend upon the fragile market and
economic conditions.
2
In 2006, Japan’s gross debt stood at 160% of GDP, well above the 49% in UK and 64% in US,
according to the Ministry of Finance.
3
People are becoming sceptical about how pension benefit they will receive in the future, and
many young people refuse to pay premiums. In the summer of 2007, the public was outraged
at the Government because it was found the Social Insurance Agency failed to keep payment
record of 50 million insurance holders, and due to that many people were not given benefits.
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Figure 4: Trends in social security benefits (Source: Cabinet Office)
2. GOVERNMENT’S POLICIES ON AGEING SOCIETY
To deal with problems related to the ageing society, Japan enacted the Basic Law on
Measures of the Ageing Society in 1995, aiming to create a society where people at all
ages can live their entire lives with a sense of security. In 1996, the Government
stipulated “an outline of measures to tackle the ageing society”, and released its
revised version in 2001. In 2000, the Government also introduced the Long-Term Care
Insurance scheme (see the section 3, the Long-Term Care Insurance at a Glance),
whose pros and cons have been widely debated.
The Government also encourages employers to hire more senior people. Until recently,
most companies set the retirement age at 60, but the Government started in 2006 to
gradually delay the payment of public pension from 60 to 65, phasing the change in
over some years. To fill the blank between 60 and 64, when many people would have
few income sources, legislation was enacted in 2006 ensure companies to keep
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employees until the age of 65 (but they are allowed to achieve this goal gradually over
a few years). They would receive a warning if they act against it. Though more older
workers are remaining in the labour force, employers are able to cut pay to older
workers; many are finding their salaries halve when they reach 60 even if they remain
in the same position.
The Government is also proceeding with comprehensive ageing-society measures to
encourage the elderly to be more independent. In fiscal 2007, the Government set
aside 13.63 trillion yen (GBP57.78 billion), almost equivalent to the previous year, to
support employment, nursing-care, education, social participation, living
environment and research into cancer. “Innovation 25,” Japan’s first long-term policy
roadmap on innovation released in May 2007, calls for greater working opportunities
for women and the elderly and improving productivity over the next two decades with
the advent of the ageing society. Public pension and insurance schemes are constantly
being reformed.
3. LONG-TERM CARE INSURANCE AT A GLANCE
3.1. Background – Why Is It Needed?
The mainstay scheme among Japan’s ageing-society measures is the Long-Term Care
Insurance (LTCI), which the Ministry of Health, Labour and Welfare (MHLW)
introduced in 2000.
As people live longer, families have to spend more and more time on caring for their
elderly family members (Fig. 5). But it is getting difficult to take care of them,
because many family caregivers are also getting older (dubbed “old-old nursing care,”
as children in their 60s and 70s take care of their parents in their 80s and 90s).
Nursing-care at home imposes on family caregivers mental, physical and financial
burdens, leading one in four of them to suffer from light depression, according to a
2005 study sponsored by the MHLW. The MHLW says in a separate report that
nursing-care is the biggest worrying factor in a retirement life for Japanese.
In the past, there had been conventional public nursing-care services, but these were
not well designed. The eligible care recipients had been limited to those who live alone
or on a low-income, and they had had no right to choose the care-service provider
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they liked to use.
The LTCI scheme was therefore designed to change the traditional concept that
nursing-care should be handled by families, and allow people to share the burden with
professional caregivers. It has opened the door for enterprises to offer nursing-care
service, which had been limited to public institutes in the past4
.
Figure 5. The number of bedridden elderly/sufferers of dementia (Source:
MHLW)
1993 (year) 2000 2010 (forecast) 2025 (forecast)
Number of the
physically weak
elderly
900,000 1.2 million 1.7 million 2.2 million
Number of the
elderly suffering
from dementia
who require
long-term care
100,000 200,000 300,000 400,000
Number of the
bedridden
elderly
1 million 1.5 million 2 million 2.9 million
3.2. How It Works
The LTCI scheme works like this: Insurance premiums are paid 50% by people aged
40 and older, and the remaining 50% by the national and regional governments.
People aged 40-64 have to pay between 2,000 yen (GBP8.3) and 6,000 yen (GBP25)
a month, depending on their income level. Benefits are paid to companies that provide
home nursing-care or run care-houses, but service recipients have to pay 10% of the
cost. The premium for people aged 65 and older varies according to municipalities,
but the average is 4,020 yen (GBP16.7) a month.
The core care recipients are those aged 65 and older. If they want to receive the care
service, they need to get certified for one of seven categories (1 and 2 for “in need of
support”, and 1 to 5 for higher-level “in need of nursing-care assistance”. There was
only one category for “support” until 2006) from regional public health offices, and the
type of available services depend upon the category. People aged between 40 and 64
4
Amid the intensifying competition in the rapidly expanding nursing-care market, a scandal
occurred in 2007, when market leader Comsn was found a number of fraudulent practices to
attract more customers, and was driven to closure. The scandal also triggered a concern among
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can be also eligible when diagnosed as one of 16 designated, ageing-related
conditions5
. But those aged above 65 can apply for the service regardless the cause of
their health problems. The service ranges from housekeeping assistance and the use
of facilities/hospitals to subsidies to purchase wheel chairs.
3.3. Rising Cost
At the start of the insurance scheme, the MHLW ambitiously said it would largely help
ease the financial burden of the certified elderly and their family, and provide a
high-quality service. The government also prompted the elderly to be cared at home
rather than staying at a hospital for a long-term (called “social hospitalisation”) or
care-houses, both of which are costly.
However, LTCI scheme is creating a new problem: the number of people certified to
receive the care service is increasing at a faster pace than the Government had
predicted. The number of care recipients grew to 4.32 million in 2005, up 70% from
2.56 million in 2000. The amount of insurance benefit payments rose to 5.8 trillion
yen (GBP24.1 billion) in 2005, up 80% from 3.2 trillion yen (GBP13.3 billion) in 2000.
The MHLW now estimates that the payments will likely top 9 trillion yen (GBP37.5
billion) in 2015 and a hefty 19 trillion yen (GBP79.1 billion) in 2025.
3.4. Controversial Reforms
To cope with uncertain developments in society, the insurance premiums are subject
to revision initially every three years. In the first revision in 2003, the premiums were
slightly raised. The scheme itself is subject to review every five years, and the first
revision came out in 2006.
The revised scheme is aimed chiefly to curb the Government’s future expenditure by
encouraging the elderly to have a more independent life. Under the original scheme
there were five categories for “in need of nursing-care” and one for “in need of
support.” For the revised one, the MHLW added one more category for “in need of
support,” and reclassified many people in the category 1 into this one, which is less
expensive.
the public about the LTCI scheme’s credibility.
5 These designated diseases include early-age dementia, cerebrovascular diseases, Parkinson’s
disease, articular rheumatism, osteoporosis that accompany fracture, diabetes-related
neuropathy and terminate cancer.
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The result is a reduced service for people reclassified into this new category: for
example, they had to give up cooking and cleaning services or wheelchair rental –
which had been available under the original scheme. Under the revised scheme, they
also have to pay extra money to use care-houses, and are encouraged to use
less-expensive home-care service. Other efforts include physical exercise training and
advice on nutrition. Insurance premiums were also raised.
Critics say the revised scheme has affected both business operators and care
recipients. But an official at the MHLW’s LTCI division says “some people lost the
benefits of the insurance scheme, but we understand that the public overall thinks it
was good to establish the LTCI scheme.”
4. CONCLUSION
Since Prime Minister Shinzo Abe took office in September 2006, a number of scandals
involving social welfare issues have come to the surface (footnotes 3 and 4). These
problems have raised concerns about the credibility of the nation’s social-welfare
system in the ageing society, and success of reforms will hinge on the fate of this
one-year administration. In the annual economic and fiscal policy guidelines, adopted
in late June 2007, the Government pledged to fix these problems and improve the
quality and efficiency of medical and nursing-care services. It also aims to reduce the
number of the elderly seeking nursing-care by 30% over the next decade, partly by
reclassifying them or helping improve their health conditions.
But the impact of the ageing society seems much greater than the Government’s
efforts to catch up. In a recent survey by the Bank of Japan’s Central Council for
Financial Services Information, as many as 90% of households aged below 60 said
they are concerned about their life after retirement. Some 70% of them cited the
reasons as insufficient savings and pension/insurance benefits. On the grim future
prospect, a sharp contrast to the robust economic-growth era in most of the late 20th
century, Prime Minister Abe’s slogan to achieve “a beautiful country, Japan” sounds
just too idealistic for many Japanese.
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References
• Annual Report on the Ageing Society 2006: the Cabinet Office
http://www8.cao.go.jp/kourei/english/annualreport/2006/06wp-e.html
• Long-Term Care Insurance in Japan
http://www.mhlw.go.jp/english/topics/elderly/care/index.html
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