Chapter 1
Overview of Social Security System

I.General Characteristics

1.Social security

As with other countries, the source of social security in Japan could be found in charity-oriented communal activities for the poor in a pre-modern era . In the modern era, while legislation such as Indigent Person's Relief Regulation (1874) and Poor Relief Law (1932) was enacted, the modern social security system based on the state's responsibility in sharing and mitigating social risk of the population did not start until after World War II with the inclusion in the Constitution of Article 25:

"(1)All people shall have the right to maintain the minimum standards of wholesome and cultured living. (2)The State must make efforts to promote and expand social welfare, social security and public health services to cover every aspect of the life of the people".

Starting with the urgent need to relieve the war-stricken people, the system of social security has gradually extended its reach. By the term "social security" the Government of Japan means a range of social policy that is the task of the welfare state: its scope is wider than in some countries and includes public health care. Table 1.1 shows the list of major schemes defined as social security by the Japanese government. The schemes are mostly carried out by Ministry of Health and Welfare, supplemented by Ministry of Labor. The organization of Ministry of Health and Welfare is indicated in Table 1.2.

2.Universal health insurance and universal pension

The year 1961 was memorable in the history of Japanese social security. Two laws for universal health insurance and pension were enacted in 1958 and 1959, respectively, and enforced in 1961. These systems have become the two main pillars of Japanese social security system. Together with Public Assistance Law (1946) which guarantees a minimum standard of living, they have worked as the major institution of social policy to mitigate the risk of sickness, accidents, unemployment, and old age.

3. Social insurance and tax

Social security systems such as those for health care, long-term care, public pension, unemployment and work-related accident take the form of social insurance. The public insurance system provides services to insured persons (and their family) in case of downfalls within their life cycle. The participation for these schemes are mandatory to all citizens and their employers in case they are employed. Contribution to the schemes is shared by all insured according to their ability to pay (in most cases according to their income). Thus, the function of social insurance is to share the risk among insured persons, and at the same time, to redistribute income among them. On the other hand, measures identified as social welfare, such as public assistance and welfare for the elderly, children and the disabled are mostly based on the general budget of the government (tax). A controversy arises between those who claim converting some of the insurance-based schemes to the tax-based schemes and those who prefer to maintain the link between the contribution and benefit through an insurance system.

4.In-cash and in-kind assistance

Public assistance provided through the social security system is either in-kind or in-cash. Table 1.3 lists major types of service by in-kind/in-cash classification.

Table 1.3 lists major types of service by in-kind/in-cash classification.

5.Service providers

Service providers of social security, such as hospitals and clinics for the health care, day-care centers and institutions for the elderly long-term care, rehabilitation centers and support centers for the disabled, and so forth, are either public or private. They operate under the supervision of the Ministry of Health and Welfare and Prefectures.

II.Revenues and Expenditure of the Social Security

Figure 1.1 shows a breakdown of social security revenue and expenditure as defined by International Labor Organization. Insurance premium accounts for 60% of the total revenue and government contributions and others for the rest. The expenditure for public pension takes up nearly half of the entire expenditure, and for health insurance, a little more than one third.

Figure1.1 Revenues and Expenditure of the Social Security:Fiscal Year 1997

@@@Note:
1.FY1997 social security revenue amounted to 90.1 trillion yen (excluding transfer from other systems). The figure in square brackets represents the ratio to the total social security revenue.
2.FY1997 social security expenditure amounted to 69.4 trillion yen. The figure in parentheses represents the ratio to the total social security expenditure.
3.Arrows to "Administrative costs" and "Balance" in the Scheme column are omitted.


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