Pension Reform in Japan at the Turn of the Century

Abstract

Changes in the social security pension system have thus far been made at least every ®ve years in Japan. Such frequent changes are considered to be ®ne tunings resulting from the rapidly changing socio-economic circumstances. Because a major overhaul was proposed in 1994, the chances were that 1999 would become another year of pension reform. In December 1998, the Japanese government decided to temporarily freeze increases in social security contribution rates for pensions for some years from ®scal year 1999 (beginning 1 April). This freeze was mainly due to the ongoing downturn of the Japanese economy. Also, in December 1998, the government decided to increase existing pension bene®ts in ®scal year 1999 to re ect only changes in the CPI over the previous calendar year, though ®scal year 1999 was previously anticipated as seeing net wage indexation of existing pension bene®ts after a ®ve-year interval. In July 1999, the government submitted the 1999 pension reform bill to the parliament, which it passed in March 2000. The aim of this article is to explain the main content of the 1999 pension reform, with some discussion of it. There has been a growing emphasis on the area of private pensions in Japan. The Japanese government recently proposed a newly de®ned contribution plan, along with amending the existing de®ned bene®t plans of occupational pensions. The reform bills concerned were passed by the parliament in June 2001. This article also explains the main points of these reforms in private pensions.