As Harada and Takada (1991) demonstrated, using a simple simulation model, that Japan's saving rate might change appreciably, depending upon the future direction of the social security programs. The NUPRI model has produced, by assuming that the current structure of the social security system is maintained throughout the projection period, trajectories of various social security-related variables. The projected results for a few key variables are displayed in Table 4.
The male contribution rate for the leading pension scheme (EPS) is projected to grow from 17.0 percent in 1995 to 20.9 percent in the year 2010, and 31.5 percent in 2025. Among Japanese pension planners, it has been generally agreed, though not theoretically well-grounded, that 20 percent will be a limit to the contribution rate for EPS. In view of this implicit consensus, it is likely that Japan's pension system will be reviewed and modified again before the year 2000, which may be more drastic than the 1985 major revrsrons.
The total medical expenditure measured in nominal terms is expected to rise almost 3.4 times over the 30-year period. This increase in medical care costs is attributable to both the aging of the population and further medical technological progress. The share of Japan's national income required for medical expenditure rises gradually from 6.6 percent in 1995 to 8.8 percent in 2025. At this juncture, it is interesting to compare these projected figures with the levels being experienced in some of the other industrialized nations. The share of national income allocated to medical expenditure, which is adjusted for intercountry differences in coverage, was 11.9 percent for France in 1993, and 13.2 percent for the United States in 1995 (Health and Welfare Statistics Association, 1997). When compared with these statistics, the projected results for Japan over the next 30 years indicate that it is unlikely to reach such levels.
How much will Japanese taxpayers be required to contribute to the social security system over the next 30 years? In 1996, the Government of Japan set a ceiling for the tax burden arising from financing the social security programs. According to the government plan (the so-called Hashimoto Vision), the national financial burden defined as [(social security contributions + taxes) / national income] should be kept below 45 percent in the years to come. As presented in Table 4, although it appears to meet this target until the beginning of the next century, it is projected to exceed 50 percent in 2014, reaching 56 percent in 2025. Obviously, if the government sticks to its current plan, both pension and medical care programs will need to be considerably downgraded in the near future.
