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Policy Action in Private Occupational Pensions in Japan since the Economic Crisis of the 1990s

Author

Listed:
  • Ministry of Health, Labour and Welfare, Japan
  • Junichi Sakamoto

    (Nomura Research Institute)

Abstract

The public pension system of Japan provides coverage for all, irrespective of occupation and income. Corporate pension plans provide additional benefits over the public pension in order to meet the diversified financial needs in retirement and play a key role in enriching people‘s life after retirement. The majority of corporate pensions in Japan are defined-benefit type. Consequently, a great amount of attention is paid to benefit rights. Nevertheless, in order to avoid the discontinuation of pension plans due to over-emphasis on benefit rights, Japan introduced a measure under the stagnant economy during the 1990s allowing pension plans to reduce accrued benefits under certain strict conditions, only when the government acknowledges that the sponsoring company will go bankrupt if employers are forced to continue to contribute to the pension plans to the same extent. At the same time, Japan introduced another measure allowing pension plans to use smoothing for valuing its assets in order to avoid temporary market fluctuations. As a result, corporate pension plans in Japan became manageable from a long-term perspective and able to adopt a flexible plan design whilst still ensuring benefit rights. L'intervention des pouvoirs publics dans les régimes privés de retraite professionnels au Japon depuis la crise économique des années 1990 Le système public de retraite du Japon couvre tous les individus, indépendamment de leur situation professionnelle et de leurs revenus. Les régimes de retraite d'entreprise offrent des prestations complémentaires, qui s'ajoutent à la pension publique et permettent de satisfaire des besoins financiers diversifiés à la retraite, et contribuent de manière essentielle à améliorer la qualité de vie des individus après leur départ en retraite. La majorité des régimes de retraite d'entreprise sont des dispositifs à prestations définies au Japon. En conséquence, une grande attention est accordée aux droits à prestations. Néanmoins, afin d'éviter qu'une focalisation excessive sur ces droits à prestations ne débouche sur la liquidation de certains régimes de retraite, le Japon a adopté pendant la période de stagnation économique des années 90 des dispositions permettant aux régimes de retraite de réduire les droits constitués sous des conditions strictes, uniquement si le gouvernement reconnaît que l'entreprise promoteur du régime fera faillite si l'employeur est contraint de continuer à financer le régime considéré dans les mêmes proportions. Parallèlement, le Japon a adopté d'autres dispositions permettant aux régimes de retraite d'utiliser une méthode de lissage pour l'évaluation de leurs actifs, afin d'éviter des variations liées aux fluctuations temporaires des cours du marché. En conséquence, les régimes de retraite d'entreprise du Japon sont devenus gérables dans une perspective à long terme, et ont pu adopter une structure souple tout en préservant les droits à prestations.

Suggested Citation

  • Ministry of Health, Labour and Welfare, Japan & Junichi Sakamoto, 2010. "Policy Action in Private Occupational Pensions in Japan since the Economic Crisis of the 1990s," OECD Working Papers on Insurance and Private Pensions 41, OECD Publishing.
  • Handle: RePEc:oec:dafaab:41-en
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    File URL: http://dx.doi.org/10.1787/5kmjrz8vbq9v-en
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    More about this item

    Keywords

    defined-benefit pension; defined-contribution pension; Employees' Pension Fund system (EPF); fonds de pension des salariés (FPS); plan de retraite défiscalisé (PRD); régime de retraite à cotisations définies; régime de retraite à prestations définies; Tax-qualified Pension Plan system (TQPP);

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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