News Japan approves pension reform law

The Pension System Reform Law was passed and enacted by the Upper House on 13 June, with a majority backing from the Liberal Democratic Party, Komeito, the Constitutional Democratic Party, and others. Key changes include expanding eligibility for employee pensions by eliminating the so-called ¥1.06 million income threshold, revising the current system that reduces pension payments for seniors who continue working, and raising the ceiling on employee pension insurance premiums for high-income earners.


A provision to strengthen the basic pension, which was initially left out of the government's proposal, was reinstated and added as a supplementary clause. It aims at preventing groups, such as the so-called "employment ice age generation," from falling into poverty in old age, whether through inadequate pensions or reliance on public assistance. Under this clause, if the following pension system review—set for four years from now—projects a decline in basic pension payment levels, reserves from the employee pension fund may be utilised to support basic pension payments.

However, if this provision is triggered, it is estimated that the government will need about 2 trillion yen annually in roughly 30 years to cover half of the additional basic pension funding, which would be paid from the national treasury. Both Nippon Ishin and the Democratic Party for the People opposed the bill in the vote, criticizing the lack of clarity on how this funding would be secured.

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