Sheet 3
"NO MORE PUBLICITY MONGERING"
Mr. Sakai is a unit chief in the Research Section of the Pension Division. This section undertakes research essential to pension policy planning. Mr. Sakai is in charge of a unit studying the pension systems of foreign countries, and has worked in this department for a period of four years. He is thorough in his research and presents his findings with clarity.
Recently, Mr. Sakai was called to a meeting with Mr. Iwamoto, Assistant Director and Chief of the Research Section. Mr. Iwamoto requested that he gather together material to explain the pension systems of foreign governments to the minister. The minister was wondering if the pension fund, which presently is administered by the government, might be operated more proficiently by private companies. Funds managed by financial enterprises could yield higher returns, and in doing so would result in a direct increase in the benefit for pensioners. He has asked the secretariat to explain in detail how the pension fund is operated and the pension fund practices of other countries.
Mr. Sakai, together with his unit staff, produced a package on the pension fund operations of ten different countries. Included in this material was information on the financial situation of these pension funds, the numbers of pensioners and people who pay premium, life expectancy, pension premium, the amount of benefit received by pensioners, which sectors operate pension funds, the rates of return and the financial markets in which these pension funds are invested.
With the approval of Mr. Iwamoto, they arranged a meeting with Mr. Yasukawa, Director of the Pension Division. After a briefing by Mr. Sakai, Mr. Yasukawa pointed out the following.
"Thank you for all the work that you have done. As you are aware, our government operated pension fund is invested in the construction of basic infrastructure in our society. Minister Sekiyama, however, has suggested that we employ professional financial enterprises to operate the fund and lift restrictions on the markets in which it can be invested. He believes that left to the private sector, the fund will produce higher returns and this could lead to either an increase in the amount of pension benefit or a reduction in pension premium."
"The material you have presented shows, in fact, that the majority of other countries leave pension fund operations to the private sector. Mr. Yamamoto, Director-General of the Social Security Department, however, disagrees with the Minister's proposition. To begin with, this shift in operations would diminish our authority and power. Easing restrictions on the markets in which the fund might be invested, with the present world financial situation, might result in our finances being invested overseas. If that should happen, we will have difficulty in constructing basic social infrastructure."
"I would like you to remake this paper along the line of the Director-General's idea. It should indicate quite clearly that countries with government operated pension funds have fewer problems as a result. Actually, it looks like there is going to be a reshuffle in cabinet members quite shortly, and Minister Sekiyama may be replaced. We don't have to respond quite so urgently to the Minister's request. We won't, in fact, present this material unless he requests it from us again."
Mr. Sakai remade the material as instructed by Mr. Yasukawa. He deleted four countries from the survey, to reduce figures for those in which funds are operated by the private sector. He also deleted the rates of return as the rate for Japan was the lowest. He rationalized that a comparison of rates among countries was misleading since each has a different economic situation, the interests rates on public bonds are different, stock markets have different rates of return and the consumer price index varies from country to country.
