Dogs and Demons_ Tales From the Dark Side of Japan - Kerr [117]
Nowhere is the problem so severe as the national health-insurance plan, where, on top of the demographic undertow, a tide of rising medical costs is dragging funds underwater. By 1999, 85 percent of Japan's 1,800 health-insurance societies had fallen into arrears, forcing them to take the radical step of halting payments for elderly policyholders because they simply could not afford to pay them.
In 1996, when the national health program reached the point where collapse was imminent, the Ministry of Health and Welfare began raising contributions and lowering benefits. Holders of employee health-insurance plans now pay 20 percent of their medical costs (versus 10 percent before), and health premiums have risen from 8.2 to 8.6 percent. In addition, the ministry is levying a ¥15 surcharge on each daily dosage of medicine, which translates into approximately a 30 percent tax on medicine.
Even this isn't enough to save the system. In raising premiums by a few tenths of a percentile, the Ministry of Health and Welfare has taken its first baby step. As one popular daily newspaper has observed, these measures amount to no more than «throwing water on a red-hot stone.» During the coming decades, the share of the health bill that a salaried worker will have to bear is projected to rise to 2.5 times the present level. Even so, to fund the health costs forecast for the next decades, premiums will have to increase three times, to about 24 percent of salary by the year 2025.
An aging population is nobody's fault. If anything, it is the result of one of Japan's great modern successes – the lowering of the birthrate. In less extreme forms, an aging population is a fate that lies in store for all industrialized nations. Japan's real problem is its failure to plan for this inevitable fate. With a high GNP and a household savings rate of 13 to 14 percent (two and a half times the American rate), Japan has the wherewithal to amass pools of capital with which to support its aging population. Or so everyone believed.
Nothing comes for free – everything has its price, as the collapse of the Japanese insurance industry illustrates. Japanese households have turned to life insurance as a way of avoiding steep inheritance taxes, among the highest in the world. Indeed, the tax system essentially forces people to buy life insurance, which accounts for about 20 percent of household savings. And, as we have seen, MOF requires insurance companies to buy low-interest government bonds and invest in the stock market whenever the exchange begins to drop. After years of investing in stocks and bonds that produce no yield, insurance companies are showing zero, or even negative, returns.
Even this would not be so serious – just a case of running in place – but, in addition, life insurers are exposed to trillions of yen of bad loans extended during the Bubble. In the latter part of the 1990s, the eight biggest insurers wrote off trillions of yen in bad loans, but this is only a fraction of the real exposure, since tobashi techniques obscure most of the bad debt. The Ministry of Finance did its best to hide the damage (no insurance company had gone bankrupt since the war), but in April 1997, MOF could no longer cover for Nissan Mutual Life Insurance, which went belly-up with losses of ¥252 billion. Others followed. By October 2000, Chiyoda Mutual Life Insurance and Kyoei Life Insurance, Japan's eleventh and twelfth largest life insurers, had both collapsed, with combined liabilities of a whopping ¥7.4 trillion, in Japan's biggest corporate bankruptcies ever, with further bankruptcies and consolidations in sight. Reliable information about pension funds and insurance is sparse-so far, only a vague silhouette of the Godzillas looming over Japan in the coming twenty-five years is visible in the mist. At Nissan Mutual Life, for example, MOF knew