Both old-age pension schemes and medical care plans constitute the core of the social security system in Japan. The share of these two components in the total social security payment has changed substantially over time. In 1970, 60 percent of the total social security expenditure was allocated for medical care benefits, and 24 percent for pension benefits. In 1995, it was 37 percent for medical care benefits and 52 percent for pension benefits (Social Insurance Agency, 1998). This intertemporal shift of the allocation of the social security payment is attributable mainly to the maturation of old-age pension schemes and partly to several major changes introduced into medical care plans.
In Japan, both public pension schemes and medical care plans have evolved on the basis of occupational groups. As regards the former, there are currently six different public pension insurance schemes in operation. Among these six schemes, Employees' Pension Scheme (EPS) and the National Pension Scheme (NPS) cover approximately 90 percent of the work force. The remaining 10 percent of workers belong to four different Mutual Aid Association Schemes (MAAS). Each of these pension schemes has a different evolutionary process. For instance, EPS was instituted in 1941 originally for the purpose of mobilizing resources to finance war expenditures. In 1961, when Japan's miraculous economic spurt was at an early stage, NPS was introduced so as to insure those who had not yet been covered by any other public pension scheme： With the initiation of NPS, the universal pension system was established in Japanese society. Because of the difference in the timing of inception, each pension scheme is at a different level of maturation.
In 1985, a major pension reform was carried out; the concept of a basic pension was introduced as a base for integrating the fragmented, occupation-specific pension schemes. One of the primary objectives of this reform was a gradual reduction of various inequalities existing in the six public pension schemes. For instance, it was expected that the earnings-related component would be eliminated by the year 2005. The other inequality is associated with the inter-scheme difference in pensionable ages. For male and female members enrolled in NPS, the age for pension eligibility is 65 years. However, the members belonging to other schemes are allowed to receive, subject to a retirement test, earnings-related benefits from age 60. According to the 1986 reform, it was anticipated that this discrepancy of pensionable ages among the various pension schemes would be eliminated, by gradually raising the pensionable age to 65 by the year 2010. However, another minor reform was undertaken in 1994, and the target year was shifted to 2013. Based upon the 1994 reform, the contribution rate for EPS is projected to rise from 17 to 30 percent of salary (excluding bonuses) between 1995 and 2025. In view of the fact that the majority of employees are required to retire from their firms at age 60, this change in pensionable age may pose serious difficulties unless retirement age is raised accordingly and/or employment opportunities for the elderly are expanded to a large extent.
