## Pension Reforms in Japan

_IMF Working Papers, December 4, 2012_

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## Bibliographic details
- Authors: Kenichiro Kashiwase, Masahiro Nozaki, Kiichi Tokuoka
- Published: December 4, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475544312.001

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### Key findings
- The paper analyzes various reform options for Japan’s public pension in light of large fiscal consolidation needs.
- The most attractive option identified is to increase the pension eligibility age in line with high and rising life expectancy.
- Increasing eligibility age 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 reforms include:
  - Better targeting by “clawing back” a small portion of pension benefits from wealthy retirees.
  - Reducing preferential tax treatment of pension benefit incomes.
  - 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.

### Policy recommendations
- Increase pension eligibility age in line with life expectancy trends to support growth and intergenerational fairness.
- Implement targeted benefit reductions for high-income retirees via clawbacks.
- Phase out or reduce preferential tax treatment on pension benefit incomes.
- Require pension contributions from dependent spouses of employees who currently receive benefits without contributing.
- Consider implementing the above measures concurrently to maximize fiscal impact.

### Implications and projections
- Concurrent implementation of the recommended measures could reduce the government annual subsidy and the government deficit by up to 1¼ percent of GDP by 2020.
- Raising eligibility age is emphasized for both fiscal consolidation and positive long-run economic growth outcomes.

_Excerpted from IMF Working Paper "Pension Reforms in Japan" (December 4, 2012)._

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/pension-reforms-in-japan-40141_