ABSTRACT
Because the current decreasing fertility rate in Japan will lead to an overall aging of the Japanese population in the 21st century (Figure 1), the Advisory Council on Pensions (part of the Ministry of Health and Welfare) has initiated an investigation of pension reform. The main aim of any reform will be intergenerational equity in the ratio of pension benefits to pension contributions and the maintenance of modified funding social security ( pay-as-you-go basic pension and earnings-related portion of the EPI ) despite the aging of the population. If Japan maintains the current average benefit payment to pensioners under the employee pension insurance (EPI) scheme, then, according to a 1997 population projection, the pension premium will have to increase by over 30% in order to keep the EPI budget in balance. Such an increase in pension premiums would disrupt the intergenerational equity between those receiving pension benefits and those paying contributions.
