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Strengthening Employment-Based Pensions in Japan

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  • Robert L. Clark
  • Olivia S. Mitchell

Abstract

We investigate how the Japanese pension market for funded employment-based pensions is changing and how it might be strengthened in order to better serve one of the most rapidly aging populations in the world. Public and private pensions in Japan are estimated to hold around US$3 trillion, making that system the second largest globally after the United States. However, unfavorable economic developments have cut sharply cut into asset values, and the weak economy is undermining traditional lifetime employment contracts. Recent legislation permitting the establishment of defined contribution plans in Japan may provide new employer-sponsored retirement plan opportunities. We first describe the Japanese pension system at the end of the 20th century and provide an overview and evaluation of the changes in the pension arena emerging from the 2001 legislation. Next we show that important design questions remain to be answered, if Japanese employment-based pensions are to be reformed and modernized. Finally we indicate lessons gleaned from recent changes in US pension plans.

Suggested Citation

  • Robert L. Clark & Olivia S. Mitchell, 2002. "Strengthening Employment-Based Pensions in Japan," NBER Working Papers 8891, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8891
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    References listed on IDEAS

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    1. Olivia S. Mitchell, "undated". "New Trends in Pension Benefit and Retirement Provisions," Pension Research Council Working Papers 2000-1, Wharton School Pension Research Council, University of Pennsylvania.
    2. Brown, Jeffrey R. & Mitchell, Olivia S. & Poterba, James M. & Warshawsky, Mark J., 2001. "The Role of Annuity Markets in Financing Retirement," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025094, April.
    3. Leslie E. Papke, 1999. "Are 401(k) Plans Replacing Other Employer-Provided Pensions? Evidence from Panel Data," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 346-368.
    4. Robert Clark & Fred Munzenmaier, 2001. "Impact of Replacing a Defined Benefit Pension with a Defined Contribution Plan or a Cash Balance Plan," North American Actuarial Journal, Taylor & Francis Journals, vol. 5(1), pages 32-56.
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    Cited by:

    1. Mitchell, Olivia S. & Piggott, John, 2004. "Unlocking housing equity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 18(4), pages 466-505, December.
    2. Takayama, Noriyuki & 高山, 憲之, 2012. "Matching Defined Contribution Pension Schemes in Japan," CIS Discussion paper series 570, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    3. Marie-Eve Lachance & Olivia S. Mitchell, 2002. "Understanding Individual Account Guarantees," NBER Working Papers 9195, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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