STUMP » Articles » Kerfuffle over Retirement in Japan: What's Up? » 12 June 2019, 22:44

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Kerfuffle over Retirement in Japan: What's Up?  


12 June 2019, 22:44

I will be getting to my regular depressing content on U.S. pensions another day, but let’s take a look at a political fracas in Japan, regarding a report on retirement.

Let’s start with the controversy, and move on from there:


Parties feud over controversial retirement report

Japan’s ruling coalition parties have confirmed that a report over necessary assets after retirement compiled by a Financial Services Agency panel is inappropriate.

The proposed guideline on asset building after retirement says an elderly couple will need about 20 million yen, or 190,000 dollars, to make up for revenue shortfalls if they have no other sources of income than pension benefits.

The secretaries general of the ruling Liberal Democratic and Komeito parties criticized the report at a meeting on Wednesday. They said it invited undue worry among the public about life after retirement.

Here’s the thing: is it true?

Well, that turns out not to be relevant for political purposes.

The amount itself seems like a reasonable amount, given what they say it needs to cover. But the politicians do not want to admit any nonzero amount needed above standard pensions.


Everything I’ve found so far comes from Japanese sources.

Finishing up with my first source:

On the same day, the Diet affairs chiefs of five opposition parties agreed at a meeting that it is inappropriate for Financial Services Minister Taro Aso to reject the report. Aso had said on the previous day that he will not accept it as an official report.

Eh, what’s this?

Aso refuses to accept report on retirement assets

Japan’s Financial Services Minister Taro Aso says he will not accept a controversial report that says elderly couples need 20-million yen for retirement. He says this is not the government’s stance.

A Financial Services Agency panel recently proposed guidelines on asset building for retirement, saying elderly couples need assets worth 20-million yen, or 190,000 dollars, to make up for revenue shortfalls.

Aso said on Tuesday that the report does not refer to any problem with the public pension system, and that it was inappropriate to use the word “shortfalls.”

He said the report misled the public and made people worried, and that he will not accept it as an official report.

Aso, who is also the deputy prime minister, added that the report suggests that the public pension system is collapsing, but that this is not at all true.

Um. Let me come back to that last bit. In a moment.

Aso to refuse FSA report estimating 20 million yen needed to fund retirement

“It’s different from the government’s policy stance,” Aso, who doubles as deputy prime minister, told a news conference after a regular Cabinet meeting.

“The report was interpreted as if it meant that the public pension system will collapse. However, elderly people’s lifestyles vary from person to person. There are people who can sufficiently cover their living expenses with public pension benefits, and there are others who can’t,” he said.

“Our political stance that the public pension system can cover people’s post-retirement lives to a certain extent remains unchanged,” said the finance minister.

The report was drawn up by a working group under an advisory panel to the FSA. Such reports are usually approved by the advisory panel and submitted to the Cabinet minister in charge. It is rare for a Cabinet minister to refuse to accept a report.

Yes, but is it true?!

(Also, let me be fair: these are all from Japanese news sources, but obviously, these were originally written in Japanese, so the translations into English may not be accurate.)


Government backpedals on report that said elderly couples will need ¥20 million in savings

The government effectively withdrew Tuesday a recent report that casts doubt on the ability of the public pension system to sustain people’s livelihoods in the face of a rapidly aging society, in an apparent bid to assuage voter concerns ahead of a national election.

Finance Minister Taro Aso, who is also responsible for the Financial Services Agency, indicated he would not accept the report by an agency panel, saying its premise “has caused extreme worries and misunderstanding and runs counter to the government’s existing policy.”

Yes, our policy is that we wish very hard, pretend that Japan is not only aging but shrinking in population, and thus the money fairies will make sure pensions will get paid.

“The public pension plan will never collapse,” said Aso, who also serves as deputy prime minister. The move was in response to the ruling parties’ demand for the withdrawal of the report in the run-up to the House of Councilors election slated for next month.

Oh dear lord.



The report has sparked controversy and drawn fire from both the ruling and opposition parties since it was unveiled earlier this month. It estimates that a couple who will live to be 95 years old need at least ¥20 million ($184,000) in assets to make up for a shortfall that would be incurred if they were to solely rely on pension benefits to cover living expenses after retirement.

According to one government estimate, 1 in 4 Japanese who are currently 60 will live until 95.

The paper, therefore, called on the public to take greater charge of planning for their retirement by proactively managing and investing their assets.

This is good advice! (And I thought Japanese folks were known for being savers… is this not true?)

The 78-year-old finance minister said while the government maintains the pension system is meant to cover “to some extent” the livelihoods of the elderly, though not fully, the report gave an impression that the plan cannot even achieve that goal under current policy.

Oh, well done, reporter, by pointing out exactly how old the finance minister is. Well above the usual “retirement age”.

In Japan, they’re looking at increasing the retirement age, and no, what “retirement age” means in other countries is not the same as the U.S. I’m not talking about the specific ages being used, but what it means. For Americans, we think of it as when either we’re allowed or expected to retire.

In other countries, it’s the age at which employers are allowed to force old employees out.

In the U.S., only a few professions have such retirement ages, like airline pilots.

Citing an example of a couple with a man aged 65 or older and a woman 60 or older, the report said they would face a monthly shortfall of ¥50,000 if they depended only on their pensions. If the couple were to live for 20 more years, they would be short by ¥13 million, and if they were to live for 30 more years, they would be short by ¥20 million, according to the paper, which based its figures on the average income and expenditures for elderly households.

Okay, for my fellow Americans, the non-precise but good-enough estimate to go from yen to dollars is just treat 1 yen as 1 penny. Divide by 100. So 50K yen is just $500 (approximately).

Market rates are actually lower, but for order of magnitude thinking it gives you an idea. And, frankly, $500/month seems fairly modest… that’s $6,000 per year.

Most people, in most places, realize they need some private savings to cover expenses above the bare minimum. This shouldn’t be controversial. It’s called life, and one should be prepared … and not expect the government to cover every contingency.

Prime Minister Shinzo Abe also apologized Monday, saying expressions used in the report were “inaccurate and misleading,” during a meeting of the Audit Committee of the House of Councilors.

“The report gave a false impression by saying that an elderly couple household usually suffers a deficit of ¥50,000 monthly,” he said.

As lifestyles vary among elderly people, so do their living standards, working practices and asset situations, he added.

Yes, fine, this is an average. Why not show different situations?


So here are a few more links if you want to read more into this:

Japan’s pension system inadequate in aging society, council warns

The public pension system won’t be enough to sustain people’s standard of living in a rapidly aging society, according to a government report.

A council at the Financial Services Agency estimates that a couple who will live until 95 years old will need at least ¥20 million more than what their pension benefits will provide.

The council acknowledged that the public pension serves as the main source of income during the post-retirement years, but it is calling on members of the public to take greater charge of their finances to plan for their retirement by proactively managing and investing their assets.

The report also says there is a possibility that lump sum or periodic retirement payments from companies will decrease over time.

In recent years, retirement money for those with college degrees averaged around ¥20 million, a drop by 30 to 40 percent from its peak.

A large number of elderly people are living in poverty in the world’s third-biggest economy, reflecting a decrease in lifetime employment and as the age to start receiving pension payments is rising from 60, eventually reaching 65 for all men in fiscal 2025 and for all women in fiscal 2030. The government has also floated the possibility of raising the age further to 68.

The relative poverty rate in Japan has stayed higher than the average rate in industrialized nations by more than 6 percentage points.

The decreasing birthrate is projected to have an impact on the pension benefits, with the shortfall expected to further widen in the future.

Oh, and there’s more.


Family units are shrinking these days, and it is increasingly becoming difficult for elderly women in their 60s to live without financial support from their family members, as one-time payouts from retirement no longer cover the prolonged life spans. Of the 19.4 percent of the elderly who are in poverty, there are 14 percent more single women than single men.

Only 14% more? That is not a huge disparity, but I guess Japanese men don’t die as rapidly as do American men.


First off, this isn’t really public pensions. This is their version of Social Security.

Secondly, it’s the largest pension fund in the world. (U.S. Social Security has no fund invested in real assets, so it counts in no ranking lists).

Thirdly, well, let me link a variety of stories.

I decided not to dip deeper than August 2018, but when I searched on the Social-Security-type programs thread on the Actuarial Outpost, I found 29 posts (made by me) reaching back 5 years. Not a huge amount, but my news feeds tend to be U.S.-centric.

But you can see why the Japanese government may wish to ignore troubles with the pension system.

1. the prime minister, Abe (pronounced Ah-bay), said he was going to tackle pensions
2. the pension funds, soon after, took a tumble due to stock market … um… activity at the end of 2018 (it wasn’t good)
3. for some reason, Abe et. al. want to pretend the Social-Security-like system will be able to cover all major expenditures.

Holy crap – in the U.S., at least, Social Security benefits are puny… and as for your private portions of your retirement income… well… (and yes, I saw the bill that progressed in the House today. I’ll write about that later.)


Here is the bottom line: Japan’s population is shrinking in number, as the number of deaths far outnumber births, and immigration is extremely small.

Also, it’s the “oldest” country around. (Note: I am not counting Monaco as a country.. its population is puny)

According to that, its median age was 47.3 years for their population, with Germany close behind (47.1 years).

As I’m sure you’ll want to know, the median age for the U.S. in 2016 was 38.1 years, ranked down at 61st (I didn’t remove all the bullshit nations, such as Monaco or Vatican City). In comparison, the world’s median age in 2016 was 30.4 years.

I started this thread on aging and shrinking populations back in 2014, when Japan had noted its third year in a row in population decrease.

According to this link, Japanese population has been decreasing since 2010. My assumption is that it is unlikely to change direction any time soon.

Check this graphic:

That came from this post

Here’s something to check out, too:

This is not only a problem for Japan.

But it’s still a problem.

I understand the political problem, but the politics don’t change the reality of a shrinking and aging population.

And yes, the Social Security-like program can fail inasmuch people don’t get the benefits they think they were promised. We’ve seen the equity performance taking a big hit in the past year… and if there are fewer and fewer people of working age to make up for losses…. what do you think will happen?

You can’t make a promise be fulfilled by simply asserting that the promise WILL BE FULFILLED!

There are some serious problems… and pretending they don’t exist will absolutely not help solve them.


And why am I blogging about this anyway? Well, the channel we watch most of the time (and by “we”, I mean Stu, but he tells me everything I want to hear from the channel.)

Here are the texts between us this morning:

(and yes, that’s what our texts can look like. Here’s a different set of texts:

We’re not only about Japanese politics.)

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