Where ¥130 Trillion Goes — Reading Japan's Social Security Spending by Category
Japan's social security benefit expenditure reached ¥135.5 trillion in FY2023. Pensions account for ¥56.4 trillion (41.6%), healthcare ¥45.6 trillion (33.6%), and welfare/other ¥33.5 trillion (24.7%). This article breaks down spending by category, examines the benefits these expenditures deliver, and covers GPIF, long-term care, OECD comparisons, and the intergenerational asymmetry of benefits and burdens.
TL;DR
- FY2023 social security benefits totaled ¥135.5 trillion: pensions 41.6%, healthcare 33.6%, welfare/other 24.7%
- Long-term care expenditure has grown 2.6x since the system's inception in 2001, exceeding ¥11.5 trillion in FY2023
- Japan's social expenditure-to-GDP ratio of 23.5% exceeds the OECD average (~21%) but falls well short of France (over 30%) and Sweden
What is Happening
The scale of ¥135.5 trillion in social security benefits and its three-category breakdown
Social Security Benefit Expenditure (FY2023)
According to the National Institute of Population and Social Security Research (IPSS), Japan's social security benefit expenditure in FY2023 totaled ¥135.49 trillion. While this represented a 1.9% decrease from the previous year's ¥137.83 trillion — largely due to the winding down of COVID-19-related expenditures — the underlying structural growth trajectory remains unchanged.
By category, pensions accounted for the largest share at ¥56.39 trillion (41.6%), followed by healthcare at ¥45.58 trillion (33.6%), and welfare and other at ¥33.52 trillion (24.7%). Pensions and healthcare alone account for 75% of the total, making these two categories the decisive drivers of overall benefit expenditure.
The GDP ratio stood at 22.76%, with per capita benefits at ¥1.0896 million. In other words, the average across all Japanese residents — from infants to the elderly — amounts to approximately ¥1.09 million per person per year in social security benefits.
Meanwhile, social security-related expenditure in the national general account budget reached ¥38.29 trillion in FY2025, accounting for approximately 56% of general expenditure. The fact that more than half of the national budget is devoted to social security severely constrains fiscal flexibility.
This article breaks down where the ¥130+ trillion in social security spending goes, examines the structural drivers of growth in each category, assesses Japan's position in international comparison, and reads the intergenerational asymmetry of benefits and burdens.
Background and Context
Structural growth drivers in pensions, healthcare, and long-term care, plus international comparison
The Benefits Generated by ¥135.5 Trillion — The Invisible "Return"
Before examining the breakdown of social security spending, it is necessary to recognize what this expenditure delivers to the population.
Japan's universal health insurance system caps out-of-pocket medical costs at 30% as a rule (20% for those 70+, 10% for those 75+). Without this system, the risk of personal bankruptcy from expensive surgery or hospitalization would increase dramatically. In the United States, which lacks universal health coverage, medical costs remain a leading cause of personal bankruptcy.
Regarding pensions, OECD analysis suggests that without public pensions, Japan's elderly poverty rate would jump from roughly 20% to over 50%. The ¥56.4 trillion in pension expenditure is not mere "spending" — it is the social infrastructure that supports the livelihood of the elderly.
The long-term care insurance system socialized caregiving work that was previously borne unpaid by families, particularly women. Without the system, the lives of approximately 6.91 million care recipients would depend on family sacrifice, and the economic losses from care-related job departures would be enormous.
In short, the ¥135.5 trillion in social security spending is not "disappearing" — it generates a clear return by distributing life risks across society as a whole. The category-by-category analysis below should be read with this benefit context in mind.
Pensions — The Largest Category at ¥56.4 Trillion
Pensions, which account for over 40% of social security benefits, operate primarily on a pay-as-you-go basis where current workers' premiums fund current retirees' benefits. The employees' pension premium rate was fixed at 18.3% (shared equally between employer and employee) in 2017, but the declining number of contributors due to demographic change continues to structurally compress benefit levels.
GPIF (Government Pension Investment Fund) serves as a stabilization mechanism for pension finance. As of the end of FY2024, assets under management stood at ¥249.78 trillion, with cumulative returns since FY2001 reaching approximately ¥155 trillion. However, GPIF serves as a "buffer" covering only about 10% of pension funding; the remaining 90% comes from current premiums and government subsidies. Even ample reserves cannot resolve the structural challenges inherent in the pay-as-you-go system.
The intergenerational pension gap is severe. While the benefit-to-contribution ratio for those born in 1940 is estimated at 2.3x, it drops to just 0.6x for those born in the 2000s. The macro-economic slide adjustment period for the basic pension is projected to continue until FY2057, meaning younger generations will bear progressively greater real reductions in benefit levels.
Healthcare — Four Drivers Pushing ¥45.6 Trillion Higher
Healthcare, accounting for one-third of social security benefits, continues to grow due to four structural factors:
- Aging population: Per capita medical costs for those 75 and older are approximately four times higher than for those under 65. As the aging rate rises, medical costs increase mechanically
- Advancing medical technology: Costly new drugs and advanced treatments push up per-unit costs. Immunotherapy drugs like Opdivo can cost millions of yen per patient annually
- Rising pharmaceutical costs: Pharmaceutical expenditure accounts for roughly 22% of national medical costs, and despite generic drug promotion, the total continues to rise
- Lifestyle disease prevalence: Medical costs related to diabetes, hypertension, and dyslipidemia account for approximately 30% of total medical expenditure
As detailed in The Structure of ¥48 Trillion in Medical Costs, approximately 40% of late-stage elderly healthcare funding comes from support payments by the working-age population, while reserves cover just 0.23 months of benefit expenditure. Healthcare sustainability is an even more pressing challenge than pensions.
Long-Term Care — 2.6x Growth in 22 Years
The long-term care insurance system, established in 2000, has seen benefit expenditure grow at a pace exceeding original projections. FY2023 long-term care expenditure reached ¥11.51 trillion, a record high and more than 2.6 times the FY2001 level of ¥4.38 trillion.
Annual recipients number approximately 5.67 million for care services and 1.24 million for preventive care, totaling roughly 6.91 million users. As documented in The 30-Year History of Social Insurance Premiums, long-term care premium rates rose from 0.6% at inception in 2000 to 1.82% by 2023 — tripling in just 23 years.
Long-term care expenditure is projected to accelerate further. By 2025, all baby boomers will have reached 75 or older, entering the age bracket where care certification rates surge. Government estimates project long-term care expenditure reaching approximately ¥25.8 trillion by FY2040 — more than double the current level.
Inside "Welfare and Other": ¥33.5 Trillion
The least visible of the three categories, "welfare and other," encompasses:
- Child allowance and childcare support: Continuously expanded as a measure against declining birthrates. Income limits were abolished in October 2024, with coverage extended through high school
- Public assistance (livelihood protection): Approximately 1.64 million recipient households. The low capture rate remains a structural issue
- Disability welfare services: Service expenditure under the Comprehensive Support for Persons with Disabilities Act continues to grow
- Employment insurance and workers' compensation: Includes unemployment benefits and childcare leave benefits
The child and childcare support levy to be introduced in 2026 (collected as a surcharge on health insurance premiums, starting at 0.23%) will further push up the national burden rate.
International Comparison — Where Does Japan Stand?
Under OECD criteria, Japan's total social expenditure in FY2023 was ¥139.86 trillion, representing 23.50% of GDP.
The OECD average for public social expenditure is approximately 21% of GDP, placing Japan slightly above average. However, there is a substantial gap compared to continental European welfare states such as France (over 30%), Austria, and Finland.
By policy area, Japan's distinctive feature is the concentration on "old age." Pension expenditure at 9.3% of GDP exceeds the OECD average (7.7%), while family-related expenditure has long remained low. This allocation structure — "generous to the elderly, thin for working-age adults and children" — is closely linked to the delayed response to declining birthrates.
| Country | Public Social Expenditure (% of GDP) | Characteristics |
|---|---|---|
| France | ~31% | Highest in OECD. Generous family benefits |
| Sweden | ~26% | Universal model. Strong working-age support |
| Japan | ~23.5% | Concentrated on elderly. Relatively thin family benefits |
| United States | ~23% | Moderate public spending, large private expenditure |
| OECD Average | ~21% | — |
Intergenerational Asymmetry of Benefits and Burdens
The most fundamental structural issue within the ¥135.5 trillion in social security benefits is the intergenerational asymmetry of benefits and burdens.
According to Cabinet Office generational accounting analysis (estimated as of 2001), those aged 60 and above enjoy an estimated lifetime net benefit surplus of approximately ¥65 million, while future generations (those under 20 and those yet to be born) face a net burden of approximately ¥52 million. The gap exceeds ¥100 million. However, this estimate reflects conditions as of 2001 and does not incorporate subsequent institutional reforms including the introduction of the macro-economic slide (2004), consumption tax increases (2014, 2019), and expanded child and childcare support. The magnitude of the gap may have shifted since then; the key takeaway is the directional finding that a structural intergenerational asymmetry exists.
This asymmetry arises from the fact that benefits directed to the elderly (pensions at ¥56.4 trillion + a significant portion of healthcare + long-term care at ¥11.5 trillion) constitute the majority of social security benefits, while the funding comes from working-age premiums and government bonds (burdens on future generations).
MHLW estimates also show that all working-age cohorts from their 20s through 50s are in a net burden position, while those 60 and above enjoy an annual net benefit surplus of ¥3.6 million — making the generational divide unmistakable.
A Problem of "Scale" or "Allocation"?
The ¥135.5 trillion figure is not "extraordinarily large" by international standards. Japan's social expenditure-to-GDP ratio of 23.5% only slightly exceeds the OECD average and is modest compared to France's 30%+.
The question this raises is whether the issue lies in the scale itself or in the allocation imbalance. Japan's social security allocates heavily to "elderly, pensions, and healthcare," with relatively thin coverage for "working-age livelihood support, childcare, education, and housing." Many researchers have pointed out that this allocation structure is linked to accelerating birthrate decline, growing anxiety among young people, and increasing burden perception among the working-age population. At the same time, given that Japan has the highest aging rate in the world, substantial spending on the elderly is not inherently unreasonable as a systemic response. Both scale and allocation need to be examined in combination.
The Question of Sustainability
The FY2025 social security budget of ¥38.3 trillion already accounts for 56% of general expenditure. The peak of aging will arrive in the 2040s, and under the current system, further expansion of social security benefit expenditure is unavoidable.
In Motto Ki ni Naru Shakai Hoshō (More About Social Security), Yoshikazu Kenjō argues for the importance of reconceiving social security as "a system that complements the market economy." What is needed is not merely benefit cuts, but a redistribution of burdens and benefits, expanded investment-oriented expenditure for the working-age population, and greater system transparency.
The vast majority of the ¥130+ trillion in social security spending flows as pensions, healthcare, and long-term care benefits that support the livelihood of the elderly, with the remainder forming a safety net through childcare, public assistance, and disability welfare. The benefits these expenditures deliver to the population are enormous, and simplistic "cut spending" arguments do not address the underlying issues. The question that must be asked is not "how much is being spent" but "to whom, for what purpose, and on what basis is it being allocated."
References
FY2023 Social Security Cost Statistics (2025)
Benefits and Burdens (2025)
FY2025 Social Security Expenditure Overview (2025)
FY2024 Investment Results (2025)
FY2023 Long-Term Care Benefits Statistics (2025)
Sizing up Welfare States: How do OECD countries compare? (2023)
Generational Benefits and Burdens Through Social Security (2012)
