AMPONTAN

Japan from the inside out

Getting old

Posted by ampontan on Monday, September 20, 2010

MONDAY the 20th is Respect for the Aged Day in Japan, which is a national holiday. One manifestation of the custom of Japanese (and other East Asians) to be deferential to the elderly is that all levels of government provide them with generous welfare services, as well as other gratuities that stretch the role of government beyond its legitimate functions and its means.

The Mainichi Shimbun lamented in an op-ed last week the lack of urgency for the restructuring of the health and welfare system for the aged. Everyone is aware of the critical factors: a population in demographic decline with a birth rate well below replacement level is being asked to subsidize services to older citizens, who constitute a larger part of the overall population than in other countries. That’s part of the reason some politicians and bureaucrats favor the low road of sharp increases in the consumption tax. That’s also part of the reason voters are objecting to those increases.

The government estimates that the large number of baby boomers turning 75 in 2025 will require JPY 30 trillion for their health care. As of last year, health insurance premiums brought in roughly JPY 12 trillion in revenue. To deal with this shortfall, the Liberal Democratic Party government created a new category for health care services and payment for those 75 years of age or older (or the bedridden 65 years of age or older), which total roughly 13 million people. That system took effect on 1 April 2008.

Without going into eye-glazing detail, the objective was to have those elderly able to afford it contribute more to their health care costs (though not by an onerous amount) and to equalize premium payments nationwide. Municipal governments pay for part of the system, and the wealthier governments provided greater financial assistance to their residents. The new system also automatically deducted payments from pensions, rather than have individuals be responsible for their own payments. (Japan’s system of convienient bank account transfers meant this was not a burden to begin with.) The revisions also made it easier for younger people to make the financial contributions to their own health care.

Many of the elderly immediately started complaining as soon as the new system was introduced, whining that it was a “hurry up and die” system. Of course the news media made haste to give them a platform. The opposition parties promised to roll back the reforms, but when the Democratic Party took power in a coalition government, they discovered that local governments and medical institutions didn’t want a return to the status quo ante. The new government was also unable to agree on how to modify the new system. That’s not surprising considering the DPJ’s general incompetence and the coalition partner Social Democrats pulling relentlessly to the left. Thus the system introduced two years ago remains in place.

The taxpayer-funded treats for the elderly extend far beyond health care, however, and some governments, particularly at the municipal level, are finding it difficult to face the facts. Here are two examples.

Shirahama-cho, Wakayama

Located next to the Pacific Ocean, the area is famous as one of the three oldest hot springs resorts in Japan. The Kogyoku Tenno (Emperor) bathed there in 658, and it’s still a popular resort today.

The municipality of Shirahama-cho operates four public baths, but the enterprise as a whole has been losing money. Chief municipal officer Mizumoto Yuzo told the Kii Mimpo newspaper:

I’m going to consult with the town council and the committee with jurisdiction (over the business) to see if there are some measures we can take next fiscal year.

Outdoor bath at Sakinoyu

The four baths are Sakinoyu, Muronoyu, Shirarayu, and Shirasuna. (The “yu” at the end of the first three means hot water, and is often used in public bath names in Japan.) Shirasuna is a sand bath that is open only from May to September.

The municipality’s tourism department says Sakinoyu earned roughly JPY 10 million in profit last year, but the other three are in the red. The aggregate losses for the Shirahama-cho taxpayers total JPY 9 million.

Everyone pays JPY 300 for admission to Sakinoyu. The admission fees at Muronoyu and Shirarayu are JPY 300 for people 12 and older, JPY 130 for children from six to 12, and JPY 70 for children aged five and younger. It costs JPY 100 to take a sand bath at Shirasuna. These fees were set in 1998 and haven’t been raised since.

The tourism department also says they’ve lengthened the operating hours of the baths to respond to public requests—they open earlier in the morning and close later at night—and have cut operating costs and reduced operating staff to a minimum, but they’ve reached the limits of their ability to finance the operation. This has been an ongoing problem for four years, and the lack of funds has caused the town to scrimp on upkeep. One result has been the visible aging and wear of some of the facilities.

Why is Sakinoyu making money and the others losing money? As the photo shows, the former will never have problems attracting customers. The real reason is that admission is free to Muronoyu and Shirarayu for people aged 65 and older. The age threshold was lowered from 70 and older in 1999. An estimated 240,000 people used those two facilities in FY 2009, and of those, 110,000 were old folks who got in for free. The paid admissions to Sakinoyu, meanwhile, totaled 83,000.

So now the politicos of Shirahama-cho have decided they’re going to talk about it. They might raise the fees, and they might start charging the seniors, but they haven’t decided when the changes will take effect.

What’s to talk about? Emperors are the only people who get to bathe for free. Changes to this system are overdue, but they’re still dithering in Shirahama-cho.

While they’re at it, they should come up with a plan for the immediate privatization of the facilities instead of wasting their time adjusting the fee schedule. As long as people aren’t living in mud huts without a modern water supply system, operating bathhouses is not the business of municipal governments, nor is using Other People’s Money (OPM) to foot the bill for the free baths of one age cohort. It’s no surprise that the taxpayers are subsidizing the admission of 45% of the customers at some facilities.

Chiba City

Also dithering are Mayor Kumagai Toshihito and the government of Chiba City. Neighborhood associations in the city hold different events for Respect for the Aged Day, and the Chiba City government provides financial assistance to those associations to pay for the parties. Starting this fiscal year, Mr. Kumagai says that Chiba City will raise the age limit for the per capita contributions to the neighborhood associations from 70 to 75 and lower the amount of the subsidy. He said the municipal government took the step because of an “unprecedented financial crunch”. This will amount to a saving of about JPY 50 million from the previous year’s budget. That’s a lot of ice cream and cake.

Here it is again: The municipal government of Chiba City is abandoning their fiduciary responsibility to all of its citizens by chipping in for the party favors of one group of them. Or, to be more broad-minded, they have an inadequate awareness of that responsibility to begin with. It is not the business of municipal governments to use OPM to show old people a good time.

Yet all Chiba City can manage to do is raise the age limit for the party and reduce the subsidies. What will it take for them to realize they shouldn’t be spending this money at all—municipal bankruptcy?

Suginami Ward

Some local government officials get it, however. Yamada Hiroshi, a former national Diet member and chief municipal office of Suginami Ward in Tokyo, and currently the head of the small Spirit of Japan party, is one of the few who realize the party’s over and is trying to do something about it. He is also one of the few politicians in Japan to preach the importance of personal responsibility.

Mr. Yamada often cites as an example the former practice of Suginami Ward to distribute Japanese confections (red and white manju) to meetings of associations for the elderly. The ward was so deeply in debt one of his first steps to put the government’s finances back on a firm footing was to end the free sweets. (He also cut his salary by 10%.) He was roundly criticized for being “cold” to the elderly, but he used that decision in local meetings as a teaching example to promote his efforts to restore fiscal sanity.

In 1999 Suginami Ward’s debt stood at JPY 95 billion with only JPY 1.9 billion in accessible funds. A decade later, after eliminating or privatizing some programs and reducing the municipal workforce, they were JPY 20 billion in debt with JPY 23 billion in accessible funds—in other words, in the black—and were on schedule to repay all the debt by 2011.

Fiscally responsible governments are possible–when they’re led by politicians who understand fiscal responsibility.

Roundtable Discussion

The monthly magazine Voice presents a roundtable discussion of Japanese fiscal issues in its current (October) issue with four university professors: Takenaka Heizo of Keio University (formerly of the Koizumi Cabinet), Ikeda Nobuo of Jobu University, Doi Takero of Keio University, and Suzuki Wataru of Gakushuin University.

They’re all in general agreement that the system of governmental largesse for the aged has to be reexamined. Prof. Suzuki said that people are not aware of just how generous the system is, and their awareness needs to be raised. Prof. Takenaka suggested that economic incentives are required, and proposed as one measure raising the fees people pay for the treatment of non-life threatening illnesses. He added:

I already know that people will say that human lives can’t be replaced with money, but the situation will soon be of out of control.

Prof. Ikeda said that he discussed the creation of a voucher system (also applicable for education expenses) with a group of DPJ Diet members, but one of them told him:

I understand what you’re saying, but the word “voucher” is taboo with labor unions.

Unions, of course, are the backbone of DPJ support.

Prof. Doi added that people will deliberately create the misunderstanding that such proposals amount to “market fundamentalism”. The idea, he says, is to stop the discussion of the idea by stopping thought.

The realization is growing among the people of the developed countries, if not their governments, that the Bismarkian welfare state funded with OPM (originally intended to head off the desires of a growing middle class for greater democracy) is no longer viable. If Japanese politicians at all levels and the bureaucracy don’t start to seriously examine more practical ways to provide services, and to reexamine their approach to distributing goodies that shouldn’t be free to begin with, before long the working population might get ready to pull the plug on a lot more than confections and the Japanesque bath time.

Afterwords:

Here’s a quick video tour of the Shirahama area, with a scene from the Sakinoyu bath that shows why it is so profitable.

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5 Responses to “Getting old”

  1. mac said

    I suppose one argument in defence of giving the elderly a few freebies is that the elderly did not, in their time, charge the market rate for all the services they gave to society.

    This is more than true in a nation like Japan where individuals, children, adults and the elderly, do still give free services to society rather than demand them.

    Now, the market response to that is, “screw you fool, its too late now”.

    I have seen with my own eye, in my native nation, the decline from people taking care of society, to that “care” being handed over to local government (and declining) and then be privatised out, (and declining again and be cut back) and then shutting down because it was not “profitable” … like libraries, meals for the elderly and mental healthcare even … and the terrible messes where national ‘services’ were cut up and sold off in bits to private interests.

    In Japan, you have a more unique relationship between the cities and the countryside. Sure, wealth is distributed from the cities out to the countryside. Sure, some of that money has been spend badly or wastefully. Sure, financially, the cities are probably propping up the country. But what are they going to do if the Japanese country dies … and it is dying in so many ways. Is the Japanese megatrolopolis going to just buy in everything from elsewhere and holiday there too?

    As for the “shouldn’t be free” equation … OK, fine.

    You want a drive in the country to relax, pay the toll road ¥2,000.
    You see that beautiful view, ¥1,000.
    Photograph of an old country house, enjoy the flowers I planted, ¥600.
    Did my kid make you smile, ¥800.
    You want air from our tree and greenery, let us bill you for it too.

    You are right, the problem with capitalism is that just too many things are free that shouldn’t be free, and too many things too expense (like country-made food).

    And what about all those unaffordable and unchargeable things, like putting back nature to how it was, restoring the forests, flora and fauna, fighting back that damned knotweed even?
    ——————-

    You want a drive in the country to relax…

    …have everyone else pay for your drive through confiscatory taxation, including money from people who live in cities, don’t have cars, and aren’t interested in drives in the country.

    – A.

  2. 21st Century Schizoid Man said

    Because my father’s death when I was 17, I could apply for and received a student loan operated by government pursuant to a law which loan I repaid over the years after I got job. my mother told me that she had no intention to pay all of tuitions. At that time the loan was totally interest free, so I thought it helped good deal for me. The law relating to the loan was subsequently reformed and now it bears interest. I also noted at that time that if I became a public servant, the loan turned to a grant. But I did not think about becoming one.

    I used to wonder if the interest at market rate on my student loan is also something called OPM. Now I realize it is.

    http://www.ashinaga.org/about/index.html

    This student loan is run by private, without any grant or aide from government, but founded after I graduated university and started working.

  3. bender said

    Kind of proves my theory that bringing power to the “region” won’t actually solve the problems that Japan faces…or my theory that the issue actually stems from the people, and incompetent bureaucracy or politicians are merely reflections thereof. To make the government change, you’ll have to convince the people that they’re headed the wrong way.

  4. bender said

    BTW, I’m troubled by the assessment made by many Westerners (not Bill) that Japan is “not” a democracy. They trash and ridicule the Japanese people when tensions erupt between Japan’s neighbors (like now), and it’s pretty depressing to realize how Japan is being depicted. Is this because they are totally ignorant of the situation, or is it that they are plain old racist and equate “democracy” with “white face”?
    ——–
    Possibly chagrined that Japan essentially caught up with most everyone else, surpassing all of Europe, after being flattened in 1945. Possibly racist, possibly just anti-Nipponism.

    Now preparing a post on the Senkakus, which is taking some time, but I’ll use your NYT blog post link. I don’t think I’ll spend too much time on the Western press response. Spending a lot of time on the history.

    – A.

  5. toadold said

    Actually from what I’ve noticed over the decades in the US, is that we have grown bureaucracies and a permanent political class together. It appears to me that this has happened in pretty much all of the worlds democracies. The thing that is different is that more an more the problems with this is becoming apparent. In the US the revlusion of the public to all this has lead to the Tea Party MOVEMENT. It will be very interesting to see what eventually happens in Japan.

    —————-
    T: Excellent video! Thanks.

    – A.

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