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ECONOMY > Economic Policy

MOF adjusting financial sources of social welfare programs to secure money in budget

  • July 31, 2016
  • , Nikkei , p. 3
  • Translation

The Ministry of Finance (MOF) is adjusting ways to finance social security costs in fiscal 2017 budgets, as the postponement of a consumption tax increase derailed its initial plans. To fund 100 billion yen needed to improve the working conditions of daycare staff and nursing care workers, it is seeking to cut the state contributions to employment insurance reserves. It has already secured a way to fund about 65 billion yen needed to shorten a premium payment period necessary to qualify for pensions. Meanwhile, how to finance measures to dole out low-income pensioners remains unclear due to their huge costs.

 

Each year, the government allocates about 150 billion yen to the employment insurance program from budgets. The amount of employment insurance reserves has topped 6 trillion yen, as Abenomics is helping improve the job market and lower payouts of unemployment benefits. MOF has been arguing that the state provisions of the employment insurance program should be curtailed for several years when the job market fares well.

 

An economic package of stimulus measures, which the government will finalize on August 2, will call for a 0.2 point cut in an employment insurance premium rate, which is borne by labor and management on a 50 to 50 basis. This will amount to a reduction of about 340 billion yen, which will be included in a budgetary draft for fiscal 2017.

 

MOF is also seeking to cut the state contribution to the employment insurance program to about 50 billion yen to use the difference of about 100 billion yen to finance measures to improve the working conditions of daycare and nursing care workers. It will coordinate with the business community by the end of the year.

 

MOF has already secured a financial source to shorten a premium payment period to qualify for pensions. About 65 billion yen is needed annually to cut the period from the current 25 years to 10 years and to reduce the number of those who do not qualify for pension benefits. The government will include in the second supplementary budget, which will be presented to the Diet in autumn, “simple cash payouts” of 15,000 yen per low-income household – the amount equivalent to two years and a half, in a lump sum. This will save 132 billion yen that the government has initially planned to secure in budgets for next fiscal year and beyond. MOF will tap into this funding.

 

MOF has secured a source to build daycare facilities to accommodate an additional 500,000 children, which is estimated to cost 100 billion yen. It estimates that 100 billion yen will be squeezed out as the efficiency of social welfare programs has been improved following the enactment of the social welfare reform law in 2013.

 

Meanwhile, the government has yet to secure ways to finance cash payouts of up to 60,000 yen to low-income pensioners to be introduced along with a consumption tax increase to 10%, the strengthening of financial aid to the national health insurance program and reductions in premium payments to the nursing care insurance among low-income people. (Abridged)

 

Social welfare measures affected by the postponement of a consumption tax hike

Measures

Necessary expenses

Financial sources

Build daycare facilitates for 500,000 children

100 billion yen

Improvement of efficiency of social welfare programs

Improve working conditions of daycare and nursing care workers

100 billion yen

Cut state burden on employment insurance program

Shorten premium payment period to qualify for pensions

About 65 billion yen

Simple cash payouts in a lump sum

Annual provision of 60,000 yen to low-income pensioners

About 600 billion yen

Has not been secured

Strengthening of financial aid to national health insurance program and other measures

400 to 500 billion yen

Has not been secured

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