Japanese pension program is marginally reducing payments, because of persistent deflation.

Courtesy of the Japan Times.

Whenever I have been writing about contributions to the Japanese National Pension (or the basic pension component in the employees’ Shakai Hoken), I have been using 137 yen as the amount you would receive for making one month’s coupon payment. This number is now being reduced to 135 yen (64,875 yen for 480 monthly contributions is about 135 yen for each month).

Why is this change happening? Because Japan is “running out of money”? No. It’s because of price deflation in Japan. The pension program is designed to adjust its payout for changes in the price level, and also by a factor involving workforce demographics and average compensation. United States social security (national pension) does the same thing.

When I first began paying into National Pension, for August 2005, the yen was trading about 110 yen to the dollar. Now, it is about 80 yen to the dollar. A 1% or 2% cut in benefits, when, in dollar terms the yen is worth 37% more, isn’t anything I would lose sleep over. The pension is definitely worth doing, besides (on paper) being required.

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2 comments

  1. Johnny · November 29, 2012

    Glad I cashed out when I left.

    • hoofin · November 29, 2012

      Good thing you had fewer than three years when you did, if so.

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