Just an observation on the declining kokumin nenkin

[captainspoke]

... so I think it kind of breaks the 'contract' to retroactively means test it.

A 'contract' under which the final payout decreases each year that we don't retire...

Well, there are some states in the US (Illinois) that are locked into obligations that seem to be un-doable. Likewise, other states and municipalities have police and fireman retirement programs that cannot be abrogated.

As painful as it may seem (???), and as much as the internet may scream about it, the powers that be have recognized the demographic situation and are making adjustments.

Kudos to them for not kicking the can down the road (at least not completely) and waiting for some blow-up in the future.

[Neil]

The pension is small anyway, so it isn’t about pain. It’s about being obligated to back a three-legged horse in the world’s third largest economy. An economy which seems robust enough to contemplate sending troops halfway round the world at America’s behest, yet apparently can’t look after its ex-tax payers.

[DragonAsh]

I noticed the kokumin nenkin payments have gone down from ¥786,500 to ¥779,300 in exactly 36 months. That's a drop of ¥7,200 pa, ¥600 pm and a 0.91% decrease, I believe. Inflation is about 0.7% according to the latest figures. For 10 marks, where's that going to leave us in 15, 25, 35 years?

Well, a 0.9% decrease, but over three years. So it's more like annual cuts of 0.3%.

It's the result of dealing (poorly) with a crappy demographics situation, people living longer, AND previously kicking the problem down the road for far too long.

That said - at the same rate of ¥600 a month, in 15 years we'd be at Y743,300.
Obviously anyone would prefer more to less, but it's not like it's a life-altering amount of money.

Why don't the government put a massive tax on tobacco to expand their coffers like the other 1st world countries!?

The lastest tax system revision proposals actually do just that.

According to Mercer, the UK system got a C+, US got a C and Japan got a D. The best systems seemed to be mostly in northern Europe - Denmark, Netherlands, Norway, Finland, Sweden - basically, those countries are on all the 'good' lists - 'nicest place to live' 'happiest people' etc etc.

The recently announced corporate wage taxes in Japan are interesting - basically, companies can cut their tax rate to 20% if they raise wages and invest. Companies are sitting on massive amounts of cash, this is aimed at enticing them to use it.

This all sounds like a great idea. However, a) there are not necessarily good investment options domestically, b) there is significant uncertainty over what changing labor laws mean for temp staff and c) it's really really hard to lower wages if the economy goes south, which means companies would be stuck with high-cost employees and limited capacity for layoffs, which means they would be at a severe disadvantage compared to other global competitors.

I think they need to focus on the labor mobility issue first - especially when the whole myth of 'working for one company then retiring' in Japan has only been (partially) true for the largest companies.

[Moneymatters]

I noticed the kokumin nenkin payments have gone down from ¥786,500 to ¥779,300 in exactly 36 months. That's a drop of ¥7,200 pa, ¥600 pm and a 0.91% decrease, I believe. Inflation is about 0.7% according to the latest figures. For 10 marks, where's that going to leave us in 15, 25, 35 years?

Well, the rate of decline is slowing. 777,800 from April 2022.

https://retirewiki.jp/wiki/Japanese_pension_system

The section on pension adjustments shows how the calc is driven by average wage. Incredible to live somewhere that average wage can decline.

I wonder what the prospects are for wage growth any time soon.

[northSaver]

I wonder what the prospects are for wage growth any time soon.

I've just read this opinion from Danske Bank:

"Inflation is moving higher, but we expect a global recession will keep unions’ focus on job security in the spring wage negotiations, obstructing a price-wage spiral."

The full document is pretty interesting actually, I hope they don't mind me posting it here:

https://research.danskebank.com/link/Th ... _Japan.pdf

[Tkydon]

I noticed the kokumin nenkin payments have gone down from ¥786,500 to ¥779,300 in exactly 36 months. That's a drop of ¥7,200 pa, ¥600 pm and a 0.91% decrease, I believe. Inflation is about 0.7% according to the latest figures. For 10 marks, where's that going to leave us in 15, 25, 35 years?

Well, the rate of decline is slowing. 777,800 from April 2022.

https://retirewiki.jp/wiki/Japanese_pension_system

The section on pension adjustments shows how the calc is driven by average wage. Incredible to live somewhere that average wage can decline.

I wonder what the prospects are for wage growth any time soon.

There are several good commentaries recently on Japan's declining wages / decline in global wage position compared to the rest of the world.

https://asia.nikkei.com/Politics/Japan- ... ion-debate

https://asia.nikkei.com/Economy/Japan-p ... h-weak-yen

https://www.japantimes.co.jp/news/2022/ ... ot-rising/

https://www.eastasiaforum.org/2022/02/0 ... tagnation/



As the current Inflation is Import Supply Led, due to short term global supply shortages and the current weak Yen, due to COVID / FED Policy, it cannot be expected to continue indefinitely, and the chances of significant wage increases are quite slim.

[Wales4rugbyWC23]

Why don't the government put a massive tax on tobacco to expand their coffers like the other 1st world countries!? They're a third of the price of cigs in the UK. Rhetorical question, of course. We know why.

The Japanese government being the biggest shareholder in Japan Tobacco is the probably biggest conflict of interest ever. It's the second or third biggest tobacco company in the world. Meanwhile, Japan is the most highly indebted country in the world. It just does not add up.

[sutebayashi]

Was curious as to how much tax revenues tobacco tax brings in, and apparently the answer is, about 2 trillion.

https://www.tokyofoundation.org/researc ... php?id=861

2 trillion yen is a bit more than I had imagined, but still with annual expenditures persistently above 100 trillion yen these days, and general tax revenues around 60-65 trillion, it’s a small slice of the pie.

Still, 2 trillion yen is no doubt a large number by itself, to some group of vested interests.

[JimmyK]

It’s perhaps already been mentioned (or it might be in response to this post), but with Japan’s aging population and increased dependency ratio, it’s likely the Kokumin payments will continue to edge up, whilst the eventual pay out on retirement will continue to decrease. Fewer people working over time (thanks in part to the declining birth rate) and more people living well beyond retirement age (thanks to generally sound state of health). There are measures that could be taken to alleviate the problem, but most would take time to have a impact I think. Like others who’ve made comments, I was also considering making back payments, but I’m not sure if it’s worth it. Would appreciate any guidance on how to go about this though, just in case. As for the payout issue, someone with a better grasp of economics and demographics than me, feel free to jump in and contradict, or add more comments!

[RetireJapan]

I was also considering making back payments

I think you are only allowed to backpay the last two years or so, so it may be the case that you won't be able to.

The key is to pay the 120 months to vest (become eligible for the pension). After that the more you pay in the bigger your pension will be but what the system will look like in decades' time is anyone's guess.

I would look into fuka nenkin or iDeCo/kokumin nenkin kikin. Hopefully you are also investing a healthy amount, so overpaying into nenkin would be a form of diversification.