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Last Updated: Tuesday, 11 May, 2004, 06:40 GMT 07:40 UK
Japan approves pension reforms
Man in Tokyo
Japan has a rapidly greying population
Japan's lower house of parliament has voted in favour of reforming the pension system, which is under strain due to the country's ageing population.

The proposal involves the public making higher payments for lower benefits.

The reform plans have been overshadowed in recent weeks by the news that a number of senior politicians have not been paying into the pensions system.

The head of the main opposition party and a top aide to the prime minister have resigned because of the scandal.

Despite the embarrassment and the bad timing, the government needs to press ahead with its reform plan, says the BBC's correspondent in Tokyo, Jonathan Head.

Without reform, the scheme could collapse as the workforce shrinks and is outnumbered by retired people claiming pension benefits.

Even though the bill has now been passed by the lower house of parliament, the real challenge will be to persuade the Japanese people to keep on supporting a pension system in which confidence has fallen to an all-time low, our correspondent says.

Missing payments

Eight senior politicians have now admitted failing to make some of the required payments into the country's mandatory pensions scheme.

File photo of Naoto Kan
Mr Kan resigned as head of the Democratic Party on Monday
Last week Yasuo Fukuda, the chief cabinet secretary and a close aide to Prime Minister Junichiro Koizumi, was forced to step down after admitting he had not paid into the scheme for several years.

On Monday the opposition Democrat Party lost its leader, Naoto Kan, for the same reason.

The effect of the two high-profile resignations - both to the government and the Democratic Party - is unclear, but the men's departure is certain to influence voters in the Upper House elections in July.

Not enough seats are being contested to threaten the government's majority in these elections, but a poor showing could nevertheless be damaging for Prime Minister Junichiro Koizumi.

New scheme

There are an increasing numbers of pensioners in Japan, and many people are afraid that paying into a pension scheme will not afford them full benefits when they retire, because there are relatively few young people to contribute.

The new plan envisages sharp increases in monthly payments and reductions in eventual benefits.

It would also streamline the complex system whereby government and private sector employees contribute to different pension schemes.

Most Japanese employees currently have their contributions deducted automatically from their salaries, but politicians, students and the newly unemployed must make the payments themselves.

Either deliberately or by accident, about 40% of the 18 million self-employed people and students aged 20 or older did not pay the obligatory premiums for the National Pension System in 2002, according to the social insurance agency.

The BBC's Jonathan Head
"They are demanding that payments be increased gradually over the next 14 years"

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