[Exclusive] Welfare Vice Minister Meets Japanese Consul in Korea: "Let's Consider Pension Reform Together"

Vice Minister Lee Gi-il Holds Private Lunch with Japanese Envoy to Korea
Discusses Pensions, Aging Population, and Low Birthrate Between Two Countries
Japan, Having Experienced Aging First, Offers Lessons for Solutions

The Ministry of Health and Welfare is strengthening cooperation with Japan to find solutions for pensions, aging, and low birth rates. Since Japan experienced the adverse effects of demographic changes earlier than Korea, it serves as a valuable reference for policy and system design.

On the 15th, Ki-il Lee, the First Vice Minister of Health and Welfare, held a private lunch meeting with Naoki Kumagai, Minister-Counselor at the Embassy of Japan in Korea. This meeting was arranged as a follow-up to the visit to Japan on December 18 last year, which aimed to establish pension reform and care policies. During the meeting, Vice Minister Lee and Minister-Counselor Kumagai exchanged discussions on pension reform issues and low birthrate and aging society challenges being pursued in both countries.

Lee Gi-il, 1st Vice Minister of Health and Welfare [Photo by Yonhap News]

Vice Minister Lee explained, “There are many points that the Korean government should refer to by observing Japan’s pension and aging issues,” adding, “Since Japanese officials are in Korea, we talked about sharing the realities of pensions, low birthrate, and aging between Korea and Japan and learning together for solutions.” He also noted, “It was just before the president’s visit to Japan, so we discussed establishing a good relationship.”

During the Japan trip at the end of last year, Vice Minister Lee was accompanied by seven staff members from the Pension Policy Bureau and visited the Ministry of Health, Labour and Welfare, the Social Security and Population Research Institute, Minato Ward Office, and Japanese medical institutions. At that time, he met with Kazuhiro Oshima, Vice Minister of Health, Labour and Welfare, and Kengo Wakabayashi, Director of the Pension Division, to hear about Japan’s pension reform process and future plans.

Japan Experienced Aging Earlier... Seeks Lessons for Solutions

The Korean government is closely observing Japan’s current situation because Japan faced similar issues earlier. According to the UN, Japan’s aging rate (the proportion of elderly in the total population) surpassed 7% in 1970. Korea entered the 7% aging rate bracket 30 years later, in 2000. Japan reached 14% in 1994, while Korea did so in 2018. This means Japan also sought solutions earlier after experiencing side effects such as elderly poverty, slowed growth, and increased fiscal burdens.

The government has already identified many points to refer to from Japan’s pension reform implemented in 2004. Originally, Japan set pension levels and adjusted contribution rates accordingly, but anticipating increased fiscal burdens due to aging, it capped the contribution rate at 18.3%. It also introduced a “macroeconomic slide” to restrain pension benefits by considering wage and price increases and population changes. Although there was social opposition, this reform is now regarded as successfully established.

At a meeting between Japan’s Ministry of Health, Labour and Welfare and the Ministry of Health and Welfare, it was noted that strong leadership from then-Prime Minister Koizumi played a key role in the success of the pension reform. Senior ruling party figures supported the unpopular pension reform, and officials from the Ministry of Health, Labour and Welfare succeeded in persuading the National Diet through meticulous system design. The gradual increase of contribution rates over 13 years to minimize public burden and economic impact was also positively evaluated.

Additionally, Japanese pension experts advised the Korean government to “consistently explain to the public that pensions are insurance, not savings.” They also reportedly suggested that Korea must “choose whether the current generation will receive more benefits or pass them on to future generations,” and that “along with pension reform, the retirement age of public officials should be extended and employment in the private sector increased.”