General Edition Sunday, October 1, 2006 Issue No. 393
- What's new
- Candidate roundup
- Upcoming events
- News credits
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+++ WHAT'S NEW
Who needs a pension?
The Ministry of Health, Labor and Welfare is apparently considering a proposal to publicly honor wealthy retirees who decide not to collect their pension. Currently a pensioner who starts collecting their payments cannot opt out of the system, but the new proposal will allow wealthier pensioners to opt in and out depending on their feeling of financial well-being.
The incentive for not collecting a pension will be an official "thank you" from the government and public naming, with their permission. Since about 1m Japanese have personal assets worth JPY100m or more, and most of them are people aged over 65, the government reckons that if just 10,000 wealthy seniors forwent their pension it will save the nation more than JPY20bn a year.
So, we have a question. Would you, after 25 years of paying what is becoming an onerous amount of tax, and knowing that the government is still allowing bureaucrats and local governments to pilfer money and enjoy perks such as luxury housing in inner city locales, would you suddenly and heroically be willing to donate your pension to the government? We didn't think so. The fact is that asking ordinary people to make an extraordinary sacrifice requires extraordinary circumstances -- usually a war, disaster, or social revolution. Now, in the spiralling government debt, it is true that we have a disaster in the making, but the consequences of it are still years away.
If the government is truly serious about getting rich people to support pension cuts or deferrals, they will need to offer incentives that will appeal to the target audience
-- such as inheritance tax breaks. Most of Japan's so-called rich are in fact not so liquid, possessing most of their wealth in land and just a modest amount in cash and stocks. If such people thought that they could keep their estates intact after death, passing them on to their families without taxation, a number of them may well be willing to forego the monthly state-sponsored stipend.
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Japan's underfunded pension situation has already undergone radical surgery, when in 2004 the premiums (tax) paid by salaried workers was put on a schedule to almost double through to 2017. The increase certainly did rescue the pension program from imminent crisis and it was done with just a modicum of grumbling by the voting public. But with the recent news that the nation's birth rate continues to drop, the government's actuaries are realizing that the population curves they predicated the 2004 adjustments on are already out of whack. The low end was supposed to be a birth rate of 1.31, but in fact last year the rate fell to just 1.25. Either the Japanese need to make more babies, soon, or more tax is needed.
The government has already promised that it won't tax workers more than 18.3% (the maximum in 2017) of their salaries to support the pension, so a repeat of the 2004 exercise is not planned. Instead, the politicians are now talking about doubling the consumption tax to cover obligations instead. The problem with doing this is that it will probably kill the reviving economy, just as happened in 1997 and 2001. The Abe cabinet is very aware of this situation and instead has said that they plan to delay a political debate on the topic until Fall of next year earliest, giving Abe enough time to settle in, the LDP to win the Upper House Elections, and presumably for his team to scape-goat and replace the Social Insurance Agency, a process Abe started doing while still Chief Cabinet Secretary.
If you're in your 40's right now, you stand to have the dubious honor of being the first generation to get little or nothing (at least, you'll get nothing until you're 65, since that will be the new retirement age from 2013) for a tax which in 10 years time will be equal to about 36% of your salary (half paid by you, half by your employer). A recent AXA Japan survey found that 97% of Japanese believe that the pension will drop even more than already forecast, in the next 10 years, and that 43% feel gloomy about their retirement.
With a situation like this, we see there being very little alternative but to either introduce a means-tested pension, such as employed by the UK or a "citizens" pension such as used in New Zealand.
The problem with means testing is that it acts as a disincentive to many people to would otherwise save for their retirement, since they are going to be forced to use up those savings -- and they consume as they earn. Actually this may not be such a bad thing in Japan. However, a recent survey in the UK has found that the system is deeply unpopular, with over half of tax payers wanting it to end.
The "citizens" pension is a concept whereby all citizens of the nation upon retirement receive a basically equal amount of pension, regardless of how much they actually contributed during their working lives. This thus provides a public safety net, but allows the government to decouple itself from past pension funding deficits.
Regardless of which direction the policy makers go, one thing is for sure -- they are going to have to drop the guaranteed minimum benefit ratio of 50% of pre-retirement income and raise taxes. Our guess is that the government will increase the consumption tax in 2008 after much public hair-pulling, probably to 10%, and over the following 10 years substantially reduce pay-outs to recipients. Perhaps they will go for an NZ-style flat-rate pension program, since this is something that the opposition DPJ party is already promoting.
Lastly, the eagle-eyed among you may have noticed we're starting a new section today, called Corrections/Feedback.
One of the most difficult things in writing the newsletter is knowing that there are some readers who know a lot more about each subject than we do. Thus, we plan to incorporate their knowledge into future issues. We encourage readers to submit letters by email, to firstname.lastname@example.org.
...The information janitors/
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- First missiles arrive
- Mental illness cases grow
- Big M&A deal goes through
- Australia-Japan trade deal back on agenda
- International demand increases food prices
-> First missiles arrive
The US military has said that the first delivery of components for a missile system for Japan was made this week in Okinawa. The new missiles are surface-to-air PAC-3's and will be emplaced over the rest of this year, becoming operational by March 2007. Apparently this is Japan's first missile defence system and comes in the wake of North Korea's missle test in 1998. (Source: TT commentary from japantimes.co.jp, Oct 1, 2006))
->Mental illness cases grow
A survey by the Health, Labor and Welfare Ministry has found that 82% of companies with 1,000 or more employees have staff taking sick leave for mental illness. Of these 97.3% were off work for a month or more. Perhaps not surprisingly, smaller firms have a lower incidence of mental illness, with about only 1.5% of firms with 10 or less employees losing staff for this reason. ***Ed: There is no mention of the types of illness, but we wouldn't be surprised if stress was the leading cause. Apparently many of the major companies admitted in the survey that they had employees working more than 100 hours of overtime a month.
This equates to a minimum 90-hour working week, basically meaning those staff members are working all the time.**
(Source: TT commentary from mainichi-msn.co.jp, Sep 30, 2006)
->Big M&A deal goes through
In a major consolidation for TEPCO, Tokyo's power company, it has agreed to sell its fiber optic network operations for JPY100bn (US$847m) in stock to KDDI, Japan's second largest telephone company. KDDI will issue new shares to finance the deal. TEPCO owns the 5th largest fiber network in Japan, with about 280,000 customers and access to many more. KDDI will add these to its existing 170,000 subscribers to lift it to the Number 4 position in Japan for fiber-based subscribers, after NTT East, NTT West, and Usen. (Source: TT commentary from thenews.com, Sep 29, 2006)
->Australia-Japan trade deal back on agenda
The Australian newspaper reports that in the face of a pending China-Australia Fair Trade Agreement (FTA), Japan has suddenly realized that it stands to lose its preferred trading relationship with Australia as China cozies up. Japan has long enjoyed a strong relationship with Australia but has not sought to bind the two countries any closer than other nations that it trades with.
Considering Japan's dependence on tremendous volumes of food, energy, and and raw materials from Australia, concerns about China have reprioritized the political agenda and suddenly an Australian FTA agreement looks to be back on the table. In 2005, Japan imported AU$28.4bn from Australia, an AUS$11bn surplus in Australia's favor. In comparison, exports to China from Australia were valued at AU$16bn.
(Source: TT commentary from theaustralian.news.com.au, Sep 29, 2006)
-> International demand increases food prices
The Nikkei reports that competition for international food resources from Europe and Asia, and particularly for seafood, is having a significant affect on Japan's domestic food prices. Pollack, a staple for processed fish products, rose to US$2,156 last year on demand from South Korea. That is US$80 a ton more than what the Japanese are used to paying. Silver salmon prices have shot up 50% to US$4,998/ton, on demand from Europe. The Nikkei reckons that since the outbreak of mad cow disease, many consumers internationally are switching from farm animals to fish and fowl food sources, with the result that the global demand for seafood jumped 30% in the 10 years through to 2003.
Australian cheese has also become in great demand in China, and the average price for cheese has risen 36% since 2000, to JPY331/kg in July. (Source: TT commentary from nikkei.co.jp, Sep 27, 2006)
NOTE: Broken links
Many online news sources are now removing their articles after just a few days of posting them, thus breaking our links -- we apologize for the inconvenience.
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+++ CANDIDATE ROUND UP/VACANCIES
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* Day-to-day maintenance of web content
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* Day-to-day maintenance of Windows and Macintosh PCs
* Installation and configuration of new computers,
software, and peripherals
* Administration of a small LAN
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* Strong HTML and CSS skills (source-based)
* Scripting and database skills using PHP and MySQL
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* BA/BS or equivalent
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+++ UPCOMING EVENTS/ANNOUNCEMENTS
ICA Events - Oct 19
Presenter: Brent Jacobs, Group Manager, Windows Live Operations - Microsoft
Title: Deploying and Managing Large-Scale Online Services at Microsoft
Details: http://www.icajapan.jp/ (RSVP Required)
Date: Thursday, Oct 19, 2006
Time: 6:30 Doors open, Light refreshments served, no dinner
Cost: 1,000 yen (members), 2,000 yen (non-members) Open to all -
Location is TEMPLE UNIV MITA CAMPUS
IT events announcements are priced at JPY50,000 per week.
For more information, contact firstname.lastname@example.org
Starting this week, we will be running comments and corrections submitted by readers. We encourage you to spot our mistakes and amplify our points, by email, to email@example.com.
-> TT392 on Leukemia. We said one possible cause of
leukemia was viruses, and we then commented that one rare form of adult leukemia found in Japan is supposed to derive from HIV.
*** Reader: "Not quite, actually, the T-cell leukemia to which you refer to is HTLV-I. The HIV virus is a different strain, although it used to be classified as HTLV-III."
Thanks for the correction.
...The information janitors/
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+++ ABOUT US
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