October 5, 2018 / 5:23 AM / 2 months ago

Japan's Abe attempts to tackle welfare reform in final term as premier

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe kicked off debate on Friday on overhauling the welfare system, which is likely to be the last major economic reform during his final term in office.

FILE PHOTO: Japan's Prime Minister Shinzo Abe attends a news conference after reshuffling his cabinet, at his official residence in Tokyo, Japan October 2, 2018. REUTERS/Issei Kato

Abe has pledged to devise a plan to keep older people in the workforce longer and to reduce the financial burden Japan’s rapidly ageing population places on the pension system.

“I want to study how to raise the retirement age above 65,” Abe told an advisory panel on investing for Japan’s future.

The panel met for the first time since Abe won last month’s leadership vote for his party, which gave him a final three-year term as prime minister and chance to cement his legacy.

Advisers at the meeting presented a rough draft of policy ideas, including encouraging more use of industrial robots and artificial intelligence.

Before the leadership vote, Abe said his main economic policy priority would be raising the retirement age to above 65 and letting the elderly defer collecting pension payouts until they reach 70.

Fewer workers are paying into the national pension scheme due to a shrinking workforce, but more elderly are withdrawing funds as they retire.

Separately on Friday, private-sector members of the Council on Economic and Fiscal Policy called for fiscal spending to offset a nationwide sales tax hike scheduled for October 2019, and for more infrastructure spending after a series of natural disasters.

PASSING EXCESS SAVINGS

The members urged the government to make bigger cuts to health and welfare spending from next fiscal year and recommended creating a scheme that encourages older generations to pass excess savings to younger family members.

The private-sector members are academics considered close to Abe, so their proposals often influence policy.

Economists have long argued for bold steps to reduce pension payouts, but many worry Japan’s population is shrinking and ageing so rapidly that the government cannot keep up.

Abe has promised to invest in infrastructure to cope with the natural disasters that increasingly batter Japan. But more spending could make it harder to rein in the debt burden, which at more than twice the size of Japan’s $5 trillion economy is the worst in the world.

Abe surged to power in 2012 promising to reboot the economy, and he oversaw a combination of radical monetary easing, fiscal stimulus, and labour reforms, known as Abenomics, which had some initial success.

Corporate profits rose partly as the yen weakened, consumer spending picked up, more women entered the workforce, and some companies improved wages for lowly-paid part-time and contract workers.

However, some critics argue Abenomics did not create enough high-paid jobs in services, that it failed to foster enough innovation, and ultimately wasn’t able to generate sustained inflation as some low-income households were left behind.

Reporting by Stanley White; Editing by Richard Borsuk

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