This month the Japanese government, which until now has gone out of its way to protect the nation’s senior citizens, swallowed hard and moved to re-establish the link between pensions and the consumer price index. In the context of Japan’s deflation-ravaged economy that will mean a 0.9 percent cut in benefits.
After more than a decade of economic malaise, during which equity and property prices have tumbled 80 per cent, observers wonder why the government has not done this before.
Many economists argue that Japan’s economy will never regain its vigour because of its shrinking population. If that is true, pension funds cannot hope to make the investment returns at least domestically they need; investments in the Nikkei over the past decade have shrunk by four-fifths, while returns on 10-year government bonds yield a wafer-thin 0.8 per cent.
Source: David Pilling, Golden age over for Japanese pensioners, Financial Times, February 19, 2003.
For more on Social Security Problems in other countries http://www.mysocialsecurity.org
