As the aging of Japan’s population accelerates, people are increasingly worried about their retirement finances. In a Cabinet Office survey carried out last August, “planning for retirement life” was cited by the largest portion of the respondents (at 55.4 percent) as main sources of their troubles and concern in life. It was against this background that a working group at the Financial System Council of the Financial Services Agency on June 3 released a report titled “Asset building and management in an aging society” — estimating that an average elderly couple whose husband used to work as a company employee and who rely mainly on public pension benefits for income would need ¥20 million in savings to cover their retirement expenses.

Although the public pension falls under the jurisdiction of the Health, Labor and Welfare Ministry, the FSA report discussed the issue of funding for retirement life from the viewpoint of emphasizing the importance of people building up their own assets to prepare for retirement expenses. However, the report triggered confused discussions over the ¥20 million figure as follows.

The government has so far explained that the public pension system will be secure for 100 years. But some opposition parties and the members of the media charged that the pension system cannot be called secure for 100 years since it would be unrealistic to expect people to save as much as ¥20 million.

In response to such criticism, Finance Minister Taro Aso, who is also in charge of the FSA, said that he would not accept the report as a formal document out of concern that it might fuel public concern over retirement life. Senior lawmakers in the ruling coalition parties joined the chorus against the report, with some even noting that such a report did not exist anymore (since the government refused to accept it).

An even more confused discussion continued. When an opposition lawmaker asked Aso about his own pension benefits during Diet deliberations, the minister could not give an answer. It was also made known that he had not read the report, exposing his lack of awareness and understanding of the public pension issue. The opposition lawmaker accused Aso of being negligent in his duty in failing to even read the report, which she said can be read in only five minutes. But that also raised suspicions that the opposition lawmaker herself perhaps never read the report since it’s 56 pages long and cannot possibly be read in five minutes.

In their coverage of the episode, many members of the media seem to be making fun of what they deem the low literacy of political leaders on the pension issue. Behind the whole controversy, however, is an important problem that needs to be resolved by policy actions. The political leaders are urged to discuss and make constructive responses to the issue.

In the first place, the public pension system in Japan — as far as people of average income are concerned — is not designed to allow pension benefits alone cover the expenses of retirement life. Public pension benefits are meant to support people’s retirement along with their self-help efforts such as other sources of income and assets. That’s why banks, securities and other financial firms give a variety of estimates as to how much people need to save for their retirement. In that sense, the latest report issued by the FSA council merely presented a common-sense scenario that does not contradict similar forecasts already given by the health and welfare ministry, which is in charge of the pension system.

Put simply, the basic scheme of the public pension system is meant to ensure that a retired salaried worker will receive in 20 years an amount equivalent to the premiums he or she paid into the system over 40 years. It is designed so that retirees receive annual pension benefits equivalent to about 50 percent of the average wage income when they were working (or a pension replacement rate of 50 percent).

When the government says the public pension system is secure for 100 years, it means the current pension system will be sustainable since a macroeconomic slide has been implemented to adjust the amount of benefits. It is therefore inaccurate for opposition parties and the media to charge that the “secure for 100 years” pledge is a false promise. At the same time, the reaction of the government and the ruling parties to dismiss and shelve the report is hardly commendable. I want the government and lawmakers to take a cue from the controversy to take the following actions:

First, the government needs to make information about the public pension system more transparent and easier to understand. The biggest factor that fueled public concern over the pension system in the first place was the “lost pension” problem that surfaced in 2007. It was a revelation that public pension authorities (then the Social Insurance Agency, which has since been reorganized as the Japan Pension Service) had not adequately kept records of pension premiums that people paid into the system, which led the public to harbor serious doubts about the whole pension system.

The government has since regularly mailed people updated records of the premiums they had paid and estimates of the benefits that they can expect to receive in the future. However, the current format of the pension updates is not necessarily easy for people to understand. Officials in charge should make a greater effort to improve it, such as by enlisting the help of private-sector consultants.

Second, the opposition party lawmakers who charged that the current system was not secure for 100 years should make a policy proposal to realize a society in which people can feel confident about their retirement finances without making their own asset-building efforts, if they really believe in the need for such a society.

That will, of course, entail large increases in people’s pension premiums and tax burden, and a transition into a higher welfare, higher burden state along the lines of the Scandinavian model. I do not support the “big government,” but I welcome the opposition parties proposing such alternative plans and triggering active discussions on the broad framework of the public pension system. The problem is that most political parties today only criticize the government without presenting alternative proposals.

I hope that the latest controversy will serve to enhance the public and political understanding of the framework of the public pension system and facilitate constructive policy discussions on the issue.

Heizo Takenaka, a professor emeritus of Keio University, served as economic and fiscal policy minister in the Cabinet of Prime Minister Junichiro Koizumi from 2001 to 2005. He is a member of the government’s Industrial Competitiveness Council.