The Japanese public's enduring anxiety about social security

Even as the Japanese people confronted slow growth and considered whether the longstanding institutions of Japanese capitalism would be able to guarantee prosperity in the future, they faced the prospect of an aging, shrinking population and worried about the stability of Japan's social security system. As baby boomers retire, Japanese society, like other developed societies, has become increasingly worried about whether the government would be able to meet its obligations to provide social insurance, pensions, welfare and poverty relief, and eldercare.

One has to wonder about the extent to which anxiety about Japan's social safety net has influenced household decisions about consumption, savings, and investment and their appetite for higher risk, higher yield assets during the "lost decades." The question is whether public anxiety about Japan's social safety net has depressed aggregate demand beyond the basic effects of too few Japanese chasing too many goods as argued by Edward Hugh. Arguably, the DPJ's program while in government (at least for the first year or two) was implicitly based on the notion that reducing insecurity about the safety net could yield macroeconomic benefits.

In this post, I will document the persistence of public fears about the social security system during the lost decades. Since at least the late 1990s, anxiety about the stability of the future of social security has regularly ranked at or near the top of the public's priorities in economic policy, which remains the case today. Any discussion of the impact of Abenomics on the economic behavior of Japanese households has to weigh Japanese attitudes about the social safety net. If Abe is unable to ease fears about the government's ability to provide for retirees, any gains to Japan's economic performance could prove short lived.

We can see these fears about the safety net as early as 1997. A March 1997 Asahi poll asked respondents whether they felt some anxiety about their future livelihoods. 69% said they said, versus 29% who said they did not. When those 69% were asked to explain what they were anxious about, the most common response was pensions and social security (30%). Only one other reply — "my personal health" — was in the double digits (11%). The same poll asked respondents to state the degree to which they felt confident in the future of public pensions systems. 42% expressed either great (5%) or some (37%) confidence, while 55% expressed either little (44%) or no (11%) confidence.

The next year an Asahi poll found that more respondents were most uneasy about pensions and social security (30%) than about Japan's economic outlook (28%), their incomes (20%), or their jobs (13%). 

Perhaps the clearest picture of public insecurity in the late 1990s can be found in an extensive July 1999 poll on questions related to Japan's aging society. The poll was based on face-to-face interviews with 2122 respondents nationwide, marginally more than Asahi's monthly telephone polls, which usually have between 1500 and 2000 respondents.

The survey paints a portrait of wide and growing anxiety among the Japanese public about life after retirement. Asked if there is anything in particular they feel uneasy about for their retirement, 28% of respondents said they were most uneasy about living expenses and other economic concerns, the most popular choice and an increase of six points over a 1994 poll on aging issues. Even more dramatic was the finding that 85% of respondents did not believe that contemporary Japan provided for a secure retirement. The survey found the public was concerned about the "fairness" of the social security system (23% thought it fair, 68% did not); was nearly evenly divided over who should bear the burden of higher medical costs as a result of aging (25% said to make the generations currently working pay more in premiums, 32% said the elderly should pay more in premiums and fees, and 28% said that all should pay more through a consumption tax hike); and believed that most attention should be paid to pensions as opposed to health insurance or nursing care insurance. The same poll found that when asked whether they expect the state pension system to provide for them, roughly two out of three respondents either greatly (33%) or to some extent (32%) said they counted on their state pensions. 

As Japan's stagnation deepened, the public focused more on economic policy than on the safety net, and public opinion polls reflected shifting priorities. Polls during the Koizumi years simply did not ask questions about welfare, social security, or pensions. It was almost as if through his frenetic activity in other policy areas Koizumi Junichirō made the Japanese public (and the Japanese media) forget about Japan's aging society and safety net anxieties.

However, when polls did ask the public to assess the Koizumi government's social security policies, the response was not favorable. For example, in an April 2004 poll concerning Koizumi's first three years in office, 67% of respondents said they did not approve of Koizumi's pension reforms. 

By fall 2004, anxiety about the social safety net had returned to the top of the public's concerns. Asked in September what they would like the recently reshuffled Koizumi cabinet to make its top priority, 52% said pensions and welfare, topping all other choices by a considerable margin, including jobs and growth (28%). By December, dissatisfaction with the Koizumi government's handling of pensions grew, with 76% disapproval (and only 13% approval).

Of course, postal privatization dominated public discourse for the bulk of 2005, but public concerns about the pension system did not vanish: a poll taken in November 2005, after Koizumi's landslide victory in September and another cabinet reshuffle, found that 56% wanted the government to make pensions and welfare its top priority, with jobs and growth policy in second place with only 17%.

Koizumi effectively bequeathed to his successors a public hungry for the government to fix the social safety net. Polling in advance of the 2006 LDP leadership election repeatedly showed that voters wanted the election to focus on social security. For example, in January 2006, 45% of respondents said the campaign should center on "how pensions and health care ought to be," followed by 28% of respondents who wanted it to center on fiscal reconstruction and taxation. In September, after Abe Shinzō became prime minister for the first time, 43% of respondents said Abe should make pensions and welfare reform his top priority, with growth and jobs in second place with 17%. (And only 2% wanted Abe to focus on revising the constitution.) Abe, of course, suffered a crippling blow with the emergence of the "vanishing pension records" scandal, in which it was discovered that due to carelessness on the part of the Social Insurance Agency the pensions records of up to 50 million people may have been missing data. The scandal served only to heighten preexisting public fears that the social security system was not in fact secure, and ensured that it would remain a critical issue for the government to address.

The global financial crisis changed the public's priorities — but not as much as one might expect. A poll published on September 12, 2008, three days before Lehman Brothers went bankrupt, found that 40% of respondents wanted the government to focus on the economy and government finances, while 37% wanted the government to make pensions and social security its top priority. Despite the latest downturn, reforming the social security system remained high on the public agenda, especially after the DPJ took power in 2009 and appointed Nagatsuma Akira, the parliamentarian who challenged Abe on the missing pensions scandal, minister of health, labor, and welfare. Under the Kan government, social security reform became tied up with the consumption tax issue, as Kan Naoto fought to tie consumption tax revenue to social security funding, which Noda Yoshihiko ultimately succeeded at doing in 2012. A February 2011 poll actually found public support for this version of the consumption tax increase: 53% agreed with a consumption tax increase in order to secure social security funding, with only 35% opposed. (The same poll found that if asked if they support a consumption tax increase with no tie to social security, 46% were in favor and 45% opposed.)

Noda obviously struggled to make his case to the Japanese people but it was not for a lack of concern on the part of the public. In late August 2012, after the tax increase had passed both houses of the Diet, an Asahi poll found when asked how confident they were in the social security system, 64% of respondents expressed not much (47%) or no (17%) confidence in the system, compared with 35% who had full (3%) or some (32%) confidence in the system. The same poll found the public evenly divided (43% in favor versus 43% opposed) over the idea of shifting resources from spending on the elderly to spending on child care and strongly opposed (60% opposed versus 31% in favor) to charging citizens over 70 more in fees for health care.

For the moment the social safety net is once again second to economic policy in the priorities of the Japanese public. But if the Japanese people have had a constant concern over the past fifteen-twenty years, that concern is the viability of Japan's social safety net. As Koizumi discovered, if and when the economy improves, concerns over social security are bound to grow — and as Abe learned during his first government, those fears can prove fatal to a government. It is not entirely clear what the Japanese public expects their government to do to strengthen the social safety net, since support for tax increases to bolster social spending has proven so fragile. There may ultimately be nothing the government can do to reduce anxiety about the strength of the social security system. In an aging society public anxiety about the soundness of the safety net — particularly in an age of high budget deficits — may simply be an enduring fact of politics. Abe may have bought himself a temporary reprieve, but sooner or later public attention will turn back to the social security question.

The next post and the last in this series will look at public opinion polling on attitudes towards saving and investment, an important indicator of 1) how much risk Japanese households will tolerate, 2) how eager Japanese households are to participate in new-style shareholder capitalism, 3) how much households are benefiting from the Abenomics boom, and 4) the degree to which Japanese depend on the social safety net for their retirement living expenses.

Aso's strenuous life

In the last analysis a healthy state can exist only when the men and women who make it up lead clean, vigorous, healthy lives; when the children are so trained that they shall endeavor, not to shirk difficulties, but to overcome them; not to seek ease, but to know how to wrest triumph from toil and risk. The man must be glad to do a man's work, to dare and endure and to labor; to keep himself, and to keep those dependent upon him. The woman must be the housewife, the helpmeet of the homemaker, the wise and fearless mother of many healthy children. — Theodore Roosevelt, "The Strenuous Life," 10 April 1899

As Japan debates another indiscreet remark by Prime Minister Aso Taro — the chief cabinet secretary has already dismissed it as evidence of the prime minister's "inadequate linguistic ability" — it is worth considering precisely what the prime minister intended to say, and what it reveals about his way of thinking. After all, as Michael Kinsley said, "A gaffe is when a politician tells the truth."

Speaking on Saturday at meeting in Yokohama of the Junior Chamber, an organization Aso headed in 1978, the prime minister remarked on the role of citizens over 65 years old in Japanese society. "How should we use very energetic old people?" he asked. "These people are all different, but please consider that they only have the talent to work." The prime minister couldn't quite understand why he was being criticized for his remarks. At a speech in Sendai Saturday evening he stressed that his intention was to note that since Japan has many vital senior citizens, they ought to be given opportunities "to participate in society."

It is unclear to me why Aso's remarks are being treated as a gaffe. He has made no secret of his belief that — perhaps projecting from his own experience as a "vital" senior citizen — that the elderly should work if they're able. He said it in his speech opening this year's ordinary Diet session. He discussed it in his 2007 book Totetsumonai Nihon (as mentioned here). And some may recall that in November of last year he voiced his annoyance at having his tax payments go to support the infirm elderly. Aso's phrasing this time around may have been indelicate, although I would argue his remarks about senior citizens who do nothing but eat and drink was substantially worse. The point is that there is a consistent worldview and should therefore not be treated as simply another gaffe by the "linguistically challenged" prime minister.

Which brings us to the Theodore Roosevelt quote with which I opened this post. Theodore Roosevelt's speech "The Strenuous Life" might be the most complete statement of Roosevelt's worldview, an ode to the vigorous life, which Roosevelt argued was both a metaphor for the nation in international politics and also the literal bedrock for national greatness. The speech, considering that it was given following the US victory over Spain in 1898, not surprisingly ends with a rousing call for the United States to not "sit huddled within our own borders," to develop the army and the navy and take up the "White Man's Burden," as Kipling advised the US the same year Roosevelt delivered his speech in Chicago.

Having read enough of Aso's worldview, and the worldview of other Japanese conservatives, I could not help but think of Roosevelt when I read that Aso had virtually called upon Japan's elderly to live the strenuous life. I do not think the similarity is accidental. Not that Aso and his colleagues have drawn directly from Roosevelt's writings, but rather that their thinking is ultimately drawn from the same late nineteenth century Romanticism tinged with Social Darwinism that underlay Roosevelt's thinking. It is not an accident that Roosevelt admired Meiji Japan's achievements — alluded to here — right up until he came to see Japan as a threat to America's own pursuit of national greatness. Roosevelt's stress on work, toil, and strife at home and the pursuit of greatness abroad have clear echoes in contemporary Japanese conservative rhetoric (and, I should add, among certain American conservatives, at least at one point in time).

The idea of a Japanese work ethic, that Japan can overcome any of its problems if its people simply work harder, has been in a common theme in Aso's remarks as prime minister — especially in his initial comments when the global financial crisis had clearly reached Japanese shores and Aso was convinced Japan would be the first developed country to escape the recession. It animates his idea of Japan's "latent power." And it certainly is behind his idea that elderly Japanese, if they're able, should not be easing into a comfortable retirement but should instead continue working past sixty-five.

What does this intellectual lineage mean precisely? Well, not much, unless you find Roosevelt's bellicose vision of the "strenuous life" woefully out of place in twenty-first century Japan. It seems to me that the Japanese public is perfectly content with what Roosevelt disparaged as "a life of slothful ease, a life of that peace which springs merely from lack either of desire or of power to strive after great things." Having spent the twentieth century striving, many Japanese seem perfectly content to leave the striving to others and enjoy a life of peace and prosperity.

The vision thing

On Tuesday the Council on Economic and Fiscal Policy (CEFP) released the 2009 Basic Plan for Economic and Fiscal Reform (known colloquially as the honebuto), available here along with other documents from the Tuesday meeting.

The plan is controversial because the Asō government appears to have sidestepped an existing agreement — originating in the 2006 honebuto — that social security spending would be capped at 220 billion yen, a figure that the general account budget is rapidly nearing. Social security spending is by far the largest portion of the budget and a major contributor to the government's deficits, hardly surprising given Japan's demographics. Needless to say, central to the fiscal crisis of the Japanese state is figuring out how to bear the burden of providing for Japan's elderly without bankrupting the state or wrecking the economy. At the same time, the LDP has struggled to undo the damage done to the party by the Abe government's mishandling of the 2007 pensions scandal — and so, as with many other recent government and LDP documents, the 2009 honebuto stresses economic security alongside economic vitality as a goal of reform. Years of polling show that the state of social security is the Japanese public's top policy priority. The LDP cannot afford to look weak on social security as it did in 2007 if it is to have the slightest chance of winning this year's general election.

How did the Asō government resolve this tension? It punted, withdrawing the clause limiting social security spending to 220 billion yen but insisting that the government still views solving the fiscal crisis as a top medium- and long-term priority priority for the Japanese state. The new plan, for example, retains a provision that calls for annual three percent cuts in public works spending. The government will also continue to economize in other areas (which will undoubtedly undermine the effort by LDP conservatives to ratchet up Japan's defense spending).

This single episode says much about the decay of LDP rule.

Press coverage of the Asō government's decision has focused on the role played by members of the LDP's education, and health and welfare policy tribes (zoku) in pressuring the government to abandon the social security ceiling and other spending limits. "A free for all for zoku," an anonymous source told Sankei. Mainichi noted the role played by the zoku and added that Prime Minister Asō was missing in action in this debate. Naturally both of these factors are important in explaining why the Asō government softened its approach to the fiscal restraint. But it is useful to step back from the interplay of personalities: this episode shows the irreconciliable forces tugging at Asō and the LDP more generally. Asō, like Fukuda before him, is struggling to weave his way between economic reformists and traditionalists, between fiscal hawks and spendthrifts, between budget cutters and tax hikers. While at various points Asō has attempted to distance himself from Koizumi and "neo-liberal" reformism, he has stopped short of committing to an approach that is anything more than a balancing act between the competing pressures present within the LDP. The LDP cannot make up its mind what kind of party it wants to be — and unfortunately for Japan, that schizophrenic party has an outsized role in shaping government policy.

Notice that this failure of vision on the part of the LDP has nothing to do with the bureaucracy, the favorite scapegoat of the structural reformers. If the LDP had a vision for governing — or if ruling politicians could impose a vision on the LDP — the bureaucracy would not have nearly as many opportunities for mischief and malfeasance.

In other words, just as the DPJ intensifies its plans for a possible power transition, the LDP has provided an excellent demonstration of how not to govern.