Japan's Baby Boomers and the Year 2007 Problem Part 2.

(From Journal of Japanese Trade & Industry (JJTI))

Byline: Seike Atsushi

We Can Avoid the Year 2007 Problem As Table 1 indicates, approximately 90% of companies that employ 30 or more employees, and almost all large corporations, have a mandatory retirement system. Moreover, 90% of those companies that have the system for all of their employees regardless of the type of job (most retirement age systems fall into this category) have set the age for retirement at 60. In Japan, even though 60 is actually the lowest age allowed by law for set retirement, most employees of the companies over a certain size are required to retire at this age.

As it happens, this will change dramatically from 2006. Amendments carried out last year to the Law Concerning the Stabilization of Employment of Older Persons mean that from April 2006 corporations must make fundamental changes to their mandatory retirement systems. The new form of the law requires that business proprietors who have set the retirement age for their workers below 65 must carry out one of the following three measures: (1) raise the retirement age to 65; (2) abolish the mandatory retirement system; or (3) if neither of these is possible, create a system whereby workers can continue to work until 65 after "the mandatory retirement age." This "continued employment system" is defined as "a system that allows for the continued employment of elderly people who wish to remain working after reaching retirement age."

While this amendment has faced strong opposition from employers, in my opinion it was an inevitable development in the context of Japan becoming an aged society in the true sense of the word, although it came too late.

That is to say, the age of pension payment eligibility for corporate employees is in the process of being lifted to 65 years old. Of the so-called "two-tier" employee pension payments, the age of pension benefit eligibility for the fixed amount that equates to the "first-tier" is being raised by one year every three years from 2001 (it currently begins at 62 years old), and it will ultimately be increased to 65 years old by 2013. The age of pension payment eligibility for the earnings-related component is also being raised by one year every three years from 2013, and will ultimately be raised to 65 by 2025. In the context of Japan having the highest average life expectancy in the world, raising the pension payment eligibility age by five years is essential in order to maintain the employee pension system that provides post-retirement security for corporate employees. We should also note that receiving a full pension from 65 years old is the norm in the other advanced nations of the world. The changes that will occur from next year effectively mean that by undertaking one of the three options, in principle, the elderly employees will not be required to retire because of their age until they reach the amended age to receive the fixed amount of the employee pension. In other words, from next April until March 2007 they will be allowed to work until 62 years old, from April 2007 to March 2010 to 63 years old, from April 2010 to March 2013 to 64 years old and from April 2013 onwards, until 65 years old. In this respect, the Year 2007 Problem need not occur, because in 2007, employment until the age of 62 should be the rule for salaried workers, and people born in 1947 will not be requested to retire in 2007 because of their age.

The Aging of Society Occurs in Increments Rather than Surges Of course, extending employment through to the age of 65 has its difficulties. For example, raising the ...