Japan Social Security Costs Seen Reaching 190 T. Yen in FY 2040

May 21, 2018

Tokyo- Social security costs in Japan are estimated to reach up to 190 trillion yen in fiscal 2040, when the number of people aged 65 or over is projected to peak, the government said Monday.

The estimated amount is up about 60 pct from 121.3 trillion yen forecast for fiscal 2018, which ends in March next year. The growth chiefly reflects surges in pension payments, and medical and nursing care expenditures for elderly people.

The estimate was presented at Monday's meeting of the government's Council on Economic and Fiscal Policy.

To cover the ballooning social security costs, the government apparently sees the need to substantially raise the consumption tax rate and social security premiums. It will also be urged to build a sustainable social security system amid the country's falling population and rapidly aging society.

According to the estimate, pension benefits will total 73.2 trillion yen in fiscal 2040, up 30 pct from fiscal 2018.

Medical expenditures are seen reaching 66.7 trillion yen, up 70 pct, and nursing care costs 25.8 trillion yen, up 2.4-fold.

Child care-related expenses are estimated to increase 70 pct to 13.1 trillion yen, while welfare benefits and other expenditures are projected to grow 40 pct to 9.4 trillion yen.

Up to 80.3 trillion yen in public funds and up to 107 trillion yen in premium incomes are estimated to be needed to help cover the fiscal 2040 social security costs, up 70 pct and 50 pct, respectively, from fiscal 2018.

The government also plans to utilize pension reserves to cover part of the total costs.

The fiscal 2040 estimates assume a "baseline" scenario, in which the country's economic growth would remain around the current level.

In fiscal 2025, when all baby boomers will be 75 or older, overall social security costs are forecast to come to some 140 trillion yen, up 20 pct from fiscal 2018. Jiji Press