Japan Data

Aging Population Means Social Security Costs Will Balloon to ¥190 Trillion in 2040


According to data compiled by the Japanese government, social security benefit costs will increase 1.6-fold from 2018 to ¥190 trillion in 2040. While Japan continues to shift towards a super-aging society, the working age population needed to support that society is shrinking, making necessary restructuring of the contributions and benefits framework.

The Japanese government has compiled estimates showing that the expenses of social security benefits, including pensions, medical care, nursing care, and childcare, will increase 1.6-fold from fiscal 2018 to ¥190 trillion in fiscal 2040. In 2040, 40 million people will be aged 65 or over, accounting for 35% of the total population, so expenditure connected to aging is set to grow.

The largest rate of increase will be in nursing care, rising 2.4-fold from ¥10.7 trillion in fiscal 2018 to ¥25.8 trillion in 2040. At this stage, it is forecast that the population aged 85 or over will be more than 10 million, with an expected rise in people who require significant long-term care and those who use care services at home and elsewhere towards the end of their lives.

Medical care will rise 1.7-fold from ¥39.2 trillion to ¥68.5 trillion. In addition to the increase in the number of aged, this is due to high-priced pharmaceuticals like some cancer treatment drugs as well as advanced medical care.

With pensions, although benefits are adjusted downwards in accordance with a reduction in the working age population, keeping the growth rate at 1.3-fold, actual costs will climb from ¥56 trillion to ¥73.2 trillion, making this the largest expense overall.

The ratio of social security benefits to the GDP, currently 21.5%, is expected to increase to 24% in 2040. However, the working age population needed to support this oncoming super-aging society is shrinking. To ensure a sustainable social security system, the framework of contributions and benefits will need to be restructured either by curbing expanding benefit costs or raising consumption tax and social insurance fees to secure the necessary financial resources.

(Translated from Japanese. Banner photo: © Pixta.)


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