Pension Reforms in Japan
International Monetary Fund, Dec 4, 2012 - Business & Economics - 21 pages
This paper analyzes various reform options for Japan’s public pension in light of large fiscal consolidation needs of the country. The most attractive option is to increase the pension eligibility age in line with high and rising life expectancy. This would have a positive effect on long-run economic growth and would be relatively fair in sharing the burden of fiscal adjustment between younger and older generations. Other attractive options include better targeting by “clawing back” a small portion of pension benefits from wealthy retirees, reducing preferential tax treatment of pension benefit incomes, and collecting contributions from dependent spouses of employees, who are currently eligible for pension benefits even though they make no contributions. These options, if implemented concurrently, could reduce the government annual subsidy and the government deficit by up to 1¼ percent of GDP by 2020.
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50 percent Across-the-board cuts aggravate already large alleviating old-age poverty already large intergenerational apan’s public pension basic pension benefits beneﬁts benefits from wealthy Category 3 participants claw-back consumption contributions from dependent contributions would discourage dependent spouses disability pension eamings-linked eamings-linked pension earnings-linked economic growth effect on economic fiscal adjustment fiscal burden fiscal savings government subsidy higher contribution rate higher pension contributions higher pension eligibility increase the pension Karam labor force participation labor supply large intergenerational imbalances median household income OECD countries OECD Pensions payroll taxes pension benefit incomes pension contribution rate pension eligibility age pension finances pension replacement rate pension spending pension’s role percent of GDP percentage point population aging poverty rate preferential tax treatment public pension system raise labor force raising the pension reduce the government reducing the pension reﬂecting relative poverty replacement ratio rising life expectancy social security spending treatment of pension wealthy retirees