Thu, Apr 11, 2019 - Page 5 News List

Low pensions forcing more Japanese to work longer

Reuters, TOKYO

Yasuhiro Furuse could have retired two years ago, but he was not entirely happy with his pension income and had to put any such thoughts to bed.

It was just as well for Furuse’s employer, Orix Corp, a financial services group, which would have struggled to find a replacement, with Japan’s jobless rate at 26-year lows.

This win-win arrangement, increasingly common in Japan, highlights a structural and policy challenge facing the world’s third-biggest economy.

Japanese Prime Minister Shinzo Abe’s government is considering raising the retirement age to 70 or 75 from 65, to ease pension burdens, as well as a labor crunch.

However, a more durable longer-term solution is for Japan to relax its strict controls on foreign workers, analysts said.

“I have no choice but to work,” said Furuse, 62, a senior adviser at Orix’s corporate business headquarters.

“I appreciate that I could keep working, which makes me better off than living on pension and savings. Besides, I want to do something to contribute to society,” he said.

Japan’s population is among the oldest on the planet and has one of the longest lifespans, putting pressure on its pension system.

The old-age dependency ratio — or the numbers of elderly against those of working age — is the highest in the Organisation of Economic Co-operation and Development (OECD).

The situation is being compounded by Japan’s deep-seated reluctance to fully open its gates to foreign workers, leaving many companies to rely on the old guard to overcome severe labor shortages.

On top of that, a lengthy spell of monetary easing by the Bank of Japan to battle deflation and spur growth has led to near-zero bond yields and crippled savings.

The current law requires companies to allow employees to work until 65 if they wish.

In practice, most companies, trying to keep a lid on labor costs, set a mandatory retirement age at 60, with an option of further five years’ work on reduced pay.

That is changing.

Orix has raised the mandatory retirement age for its employees to 65 from 60. Some other firms, such as Taiyo Life Insurance and restaurant chain Skylark Holdings Co, now also allow staff to work until 65, or 70 if employees wish.

“We will raise the retirement age to 65 to ... cope with a decline in the workforce,” Nippon Steel Corp said in a statement this month.

Mayumi Waki, a human resources manager at Orix, said the move was worth the extra expense.

The older workers seem more motivated, the firm can benefit from their client relationships for longer and younger talent has more mentors available.

“We don’t consider raising the retirement age as a cost, but a necessary investment,” Waki said.

To keep costs under control, Taiyo Life has changed the company’s pay review processes to be more focused on merit and less on career length — another change in culture that is being increasingly adopted throughout Japan.

More than 8 million Japanese workers are 65 or older, a staggering 12 percent of the entire workforce, government data showed.

The old-age dependency ratio is more than 50 percent and is expected to rise to nearly 80 percent by 2050, the OECD says.

The average employee pension in Japan is about ¥150,000 (US$1,350) a month, lower than the government’s target of 60 percent of the pre-retirement income for salaried workers, which would be ¥220,000 on average.

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