JIN-267 -- Pension Pains

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T H E J @ P A N I N C N E W S L E T T E R

Commentary on the Week's Business, Technology and Cultural News
Issue No. 267
Wednesday, March 24, 2004

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@@ VIEWPOINT: Pension Pains

** GUEST EDITORIAL: Sea Change in a Desert Land

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@@ VIEWPOINT: Pension Pains

Japan's malfunctioning state pension system is lurching into crisis as
it heads for a second straight year in the red.

With payouts exceeding income for only the second time in 18 years, the
predicted annual deficit will add yet another layer of urgency to the
bitterly divisive pension reform bill currently being debated in the
Japanese parliament.

Officials at the Ministry of Welfare have told us that when the figures
for fiscal 2003 are released later this year, they will show a deficit
at least as big as the 38 billion yen shortfall that occurred in fiscal
2002. Once again, the shortfall will be met by dipping into the hefty
reserves built up by the state pension system since 1988.

The two consecutive years of deficit have become the most tangible
evidence of the country's demographic time bomb: the Japanese population
is living to a greater average age than in any other country on earth,
but its birth-rate is declining at one of the fastest paces. The current
"pay-as-you-go" state pension system relies upon the working generation
directly supporting the retired one, and the balance has finally tipped
decisively the wrong way.

In fiscal 2002, national pension payouts were around 3.6 trillion yen
to a retired population of 21 million. That population grew by about 1
million people two years ago, and it is estimated that it will have
swollen by a similar number in the course of fiscal 2003.

But the effect of the aging population is just one of the problems
assailing the Japanese pension system. Another major issue is the
widespread and illegal failure to pay contributions -- many Japanese
have simply lost faith in the future security of the state pension
system and decided not to risk their money. Others, particularly the
4.2 million young "freeters" living with their parents and relying on
stints of part-time work, cannot afford to pay the premiums. Government
estimates show that around 40 percent of those that should pay into
the system, do not.

Equally problematic is the "locked-up" state of the reserves. Although
technically established to meet the sort of contingency that has now
emerged, a significant proportion of the 160 trillion yen reserves are
held as Japanese government bonds. The prospect of sustained selling
pressure on those has filled successive cabinets with dread.

Prime Minister Junichiro Koizumi's government has cobbled together a
reform bill that includes pushing back retirement ages, raising the
premiums and cutting benefits. The opposition Democratic Party of Japan
has raised the stakes with a proposal of its own to fund the government
contribution to the pension system with a raised consumption tax.

-- The Editors

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** GUEST EDITORIAL: Sea Change in a Desert Land

The March 11 bombings in Madrid and the increased targeting of civilian
US and European personnel in Iraq are watershed events that have outlined
a change in the methods and goals of the Iraqi "resistance." (I use that
word in a guarded sense because of certain heroic implications it has
carried at times in the past.) It seems fairly clear now that a rapid
collapse was a part of the overall Iraqi strategy, which was to avoid
the inescapable destruction that would result from large-scale force-on-
force confrontation with the invading coalition. Evidently the object was
to draw those coalition forces into extending their lines and thinning out
their combat forces so that they would be unable to maintain effective
security in their rear areas. Then -- with the goal of eventually re-
establishing a Baathist regime -- the Baathist partisans would harass the
troops, particularly those non-combat units sent in to occupy and secure
key cities and strongpoints.

This "popular rising" amid the mounting chaos under an ineffective occupying
administration would get great play in the international media, particularly
in the those nations that opposed the US-led coalition effort, and most
especially in the Islamic world. Mounting coalition casualties would
inspire calls for withdrawal by the media and opposing political parties
of the member nations. While foreign volunteers would be welcomed into the
Iraqi resistance effort, they would be under the overall control of the
Baathist underground leaders. And while the Kurdish Ansar-al-Islam would
also resist, they would not in any way be a part of the Baathist resistance

This point was reached just before the Madrid bombing incident; the flow
of the overall strategy was roughly on track until then. But things have
changed along the way -- especially with the capture of Saddam Hussein and
the deaths of his sons -- and the cumulative result is that the Baathists
have now been so weakened and dispersed that their "resistance" has either
joined hands with or been replaced by one or more groups with an interest
in exploiting Iraq's postwar chaos -- and this surely includes Al Qaeda
in some form or another. That exploitation does not have as its goal the
reinstatement of a Baathist regime. Rather its agenda is to exploit the
situation in order to include it within the scope of its own anti-Western
struggle. Despite their notorious despotism, the Baathists were quite
progressive, and their basic philosophy is incompatible with the tenets
of the reactionary Wahhabist Islamic movements such as Al
Qaeda and the Afghan Taliban.

While news accounts now tell us that President Bush was quick to assume
connections between Saddam's Iraq and the tragedy of 9/11, it seems
abundantly clear that none really existed. Efforts to point at the
current change in the violence in Iraq and the terrorist operation in
Spain as proof of this purported partnership are really only self-
fulfilling prophecy framed after the fact rather than an accurate
analysis of an Iraq-Al Qaeda & Co. relationship prior to this shift
in Iraq's on-the-ground tactical reality.

It is into this that Japan's Self-Defense Forces contingent has been
dispatched. At the time of this effort was debated and finally
promulgated, the prevailing view was that the resistance would be held
in abeyance until it either gave up or was effectively killed off.
While there would indeed be an element of risk, Japan's dispatched
units -- none of which are front-line combat elements -- could work
on rebuilding Iraq's infrastructure and on an array of humanitarian

Representing a positive, constructive role by the world's #2 economy --
which just happens to be Asian -- their presence in Iraq would act as
a precedent for Japan. This was indeed fine thinking at the time.

In my own career travels, I have met with Japanese individuals and
organizations of many kinds overseas. I have noticed their seeming
"invisibility," which in my analysis may stem from the culture's
stress on avoiding confrontation and conflict.

In Africa, South America, and the Middle east, I often noted that the
unassuming manner of the Japanese I met seemed to crown them with a
kind of non-threatening halo. Their obviously non-Western appearance
might actually help them create more communication and understanding
with the Iraqis than other members of the coalition have so far been
able to establish.

And despite the uniforms and military equipment, I thought that to the
Iraqis of Samawah, where the SDF base has now been established, the
Japanese would be cast in a pretty much positive light. Their
humanitarian stance might help them avoid some of the destructive
impulses of the Iraqi resistance, which was at the time apparently
focused mainly on the occupying US and coalition security forces.

But with the change outlined above, it is a new environment indeed.
The recent attacks on civilian engineers and relief workers show that
the SDF may actually be a more attractive target, as may the large
number of Japanese media personnel.

Recently two young backpacking Japanese bicyclists were held by
police -- and soon released -- in southern Iraq, but it would be
unwise to assume that such foolhardy individuals will continue to
be as safely invisible as they have so far been. Just imagine if it
had been two American, British, or Spanish cyclists; they probably
would have not survived long enough to encounter the police.

On the other hand, the attacks in Madrid illustrate that any coalition
partner's home country is a prime candidate for Al Qaeda-style
spectacular slaughter. This list must obviously include Japan. The
recent visibility of security cordons and policemen on foot patrol
on the streets of Tokyo tells us that this possibility is keenly felt.
And while this possibility existed in some measure before the events
of recent weeks, the probability that Japan and its people will lose
their halo of international innocence is rising rapidly.
It may only be a question of where.

-- Michael E. Stanley

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Written and edited by Roland Kelts and
Leo Lewis (editors@japaninc.com)


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