Integration of programs should be the first topic.

The long-overdue talks between the ruling and opposition parties over the proposed integration of public pension programs are finally set to begin.

The main opposition party, Minshuto (Democratic Party of Japan), says its opening salvo in the talks will be aimed at committing the ruling coalition led by the Liberal Democratic Part to a radical makeover of the nation's ailing retirement plan. But as many as 10 months have passed since the ruling coalition and Minshuto agreed to start talks on pension reform. Both sides should immediately discuss specifics without wasting time trying to get the upper hand at the outset.

One in every five Japanese covered by the national pension program, which is designed for people not working for public or private organizations, has been in arrears with premium payments for two years or longer. This fact alone offers sufficient evidence of the urgent need to revamp the system. The pension reform plan the government and the coalition rammed through the Diet last year proved very unpopular with voters, as attested by the ensuing Upper House election. The ruling parties should now make a fresh start for pension overhaul without sticking to their past proposals or seeking a face-saving formula.

There are myriad problems and issues related to the pension system, including the restructuring of the scandal-ridden Social Insurance Agency and the reform of the retirement plan for Diet members, which has been criticized for being too generous.

But the negotiations between the ruling and opposition parties should focus on the issue of integration of the several separate programs. Such integration is a core ingredient of any reform plan that can regain public confidence in the pension system.

The current system is a patchwork of independent retirement programs with varying levels of contributions and benefits, with each covering a certain category of workers. But this system is not quite in harmony with the working environment of today, where forms of employment and styles of working are far more diversified than in the past.

A growing number of people refuse or fail to pay into the national pension program, generating inequities between different programs. Many people are worried about their retirement amid rising concerns about the financial sustainability of the system.

The key issues that need to be tackled are clear. At the forefront is the question of how to integrate the two most extensive programs--the one for corporate employees and the national pension for the self-employed--which account for an overwhelming majority of the population.

With the traditional lifetime employment system on the wane while the number of irregular workers like part-timers and job-hopping ``freeters'' on the rise, it is obvious that a unified system covering all types of workers including the self-employed would be better, as Prime Minister Junichiro Koizumi has said. The ruling parties say the talks should first address two other topics: the integration of the programs for corporate and government employees and the expansion of the corporate employee plan to cover part-timers. But these steps are already on the government's pension reform agenda.

One big policy challenge is the introduction of a taxpayer identification system, which is indispensable for collecting income-linked contributions from self-employed workers.

There is strong opposition to the idea within the LDP. But Koizumi has pledged to push the party to craft a plan for a taxpayer ID number system, saying it is needed for society in the future. Minshuto has already promised to work to introduce such a system. This offers common ground for negotiations on this subject.

Another big challenge is a hike in the consumption tax to fund the retirement of the aging population. During the Upper House election campaign last year, Minshuto proposed to create a new tax with a rate of 3 percent to finance the pension system. The government is also considering a consumption tax hike to raise the ratio of state financing of the base pension. The ruling and opposition camps should compete to offer better plans to secure necessary funds to sustain the state retirement program while pruning wasteful spending.

Both Koizumi and Minshuto chief Katsuya Okada acknowledge the need for bipartisan efforts to develop a good blueprint for pension reform, a task that demands a long-term perspective. Even if the talks fall through, the arguments by both sides will help voters decide which side to support in the next election.

--The Asahi Shimbun, March 9(IHT/Asahi: March 10,2005)