T. Fukawa
troducing a mechanism (Note 3) adjusting beneficiary-contributor imbalance. However, many problems still
remain unsolved. Japanese public pension system needs to be less vulnerable to economic and demographic
changes. Introduction of individual retirement account, for example, may be useful towards this purpose. How-
ever, reform principles are not yet reached to a broad national consensus. The most important factors for the
sustainability of the public p ens ion system are fairness of the system and public trust to the s ys tem.
People’s preference for equality is strong in Japan especially for healthcare services. The right incentive
structure is crucial for the sustainable development of the healthcare system. The reform of the reimbursement
system is especially important to place the right incentives in the system. The key to achieving higher quality
and greater efficiency in healthcare, as well as in long-term nursing care, is to make greater use of the dynamism
of the private sector, in part by allowing companies to manage hospitals and nursing homes [4]. Towards this
end, prevention and the empowerment of patients are gaining importance in Japan. Priority has been given so far
to cure rather than prevention and to equal access to services in Japanese healthcare delivery, but the need to
balance patients’ freedom and cost containment makes it necessary to consider the so-called gate-keeping func-
tion of primary care physicians and to focus more on prevention of lifestyle-related diseases [5]. Prevention is
important not only for avert ing cost -push pressures to health expenditure but also for people’s quality of life [6].
As population is aging, how to provide LTC for the frail elderly is a mounting concern in the developed coun-
tries. The need for LTC is quite common among the very old. It is quite a remarkable event in Japan that the
provision of LTC has been changed from welfare and rationing services to needs-based insurance benefits. LTC
for the elderly is related not only to the dignity of the individual elderly but also to the “shape” of a society. As
LTC expendi t ure i s m ore s ensit i ve to t he agi ng of the population t han he althc a re e xpe ndi t ure a s seen in Figure 2, it
is indispensable to prevent and reduce the incidence of LTC as much as possible. Coordination between health-
care and LTC services is always a sticking problem. Financing of LTC services is still one of key issues, and in
this regard a new balance between solidarity and self-help is still important, because the cost of aged society will
never disappear in any case [2].
Financing of the social expenditure such as LTC benefit, family benefit, benefit for low income families and
benefit for handicapped is still one of the key issues in Japan, and new options have been reviewed, including
broadening the financing basis of social benefits, integration of public systems and private arrangements, and
redefinition of the elderly. Under the circumstances of trimming public programs, curtailment o f fringe benefits
by company, and enlargement of individual responsibility, new forms of solidarity including a fair share of con-
tribution by the eld erly is indispensable. Concerning a redefinition of the elderly, Japanese experience provides
an interesting example. In view of threshold ages shown in Table 2, a cautious approach has been taken in in-
troducing a healthcare program for the elderly, but extension of pension age is very slow and lagged behind
compared to the other developed countries. Even if the burden on social security (tax, contribution, and utility
charge) is reduced, curtailed social protection should be complemented by individual efforts, becaus e the cos t of
old age will not disappear. In reducing the generosity of aging-related programs, a balanced reform is needed:
spread the cost of reform equitably acros s generations; improve the willin gness to save for retirement; and con-
sider the impact of reform on low-income households [7].
Solidarity between p atients and non-patients remains the same, but solidarity between young and old may be
changing [6]. Whether to attach importance on solidarity or on self-help is not a matter of choic e but a matter of
weight. As Japan is already a front runner in coping with containing age-related social expenditure, new forms
of solidarity are indispensable to make Japanese social security system sustainable. If people pay more attention
to lifestyle-related diseases and refrain from over-use of healthcare services, then healthcare system may escape
from too heavy pressure and contribution rate may remain stable. If people have independent spirit and not easi-
ly use LTC services, then LTC expenditure may not increase too much. If public pension system does not leave
low earning workers behind, then public assistance may avoid steep increase in the number of applicants even-
tually. Each country gropes for a better balance between solidarity and individual responsibility, but there is so
far no nati ona l conse nsus on thi s iss ue in Japan [8].
We discussed structural issues in the Japanese social security system, which will provide the basis for con-
taining social expenditure in Japan. The followings are summary of our discussion:
Ageing of the population is and will be very severe in Japan. However, future fertility rate may change ac-
cording to policy and environment, and social support for child-rearing shoul d be do ne more seri o us l y;
Other than family benefit, benefits fo r low income families and handicapped as well as LTC benef it need to
be increased, which of course require additional resources. Future public pension benefit is anticipated to be