politics

Gov't prepares to unshackle huge pension fund

55 Comments
By Harumi Ozawa

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I hope they don't sink any of the funds in to the US housing market.

0 ( +7 / -7 )

Yes, well, risky investments pay more because they're ... risky. As long as things only go up, it should be fine.

3 ( +6 / -3 )

Yes, well, risky investments pay more because they're ... risky. As long as things only go up, it should be fine.

Only an average of the invested money need to go up. Any fund manager with half a brain will split money between various projects, which will normally generate better returns than what they currently get. Remember that because Japanese treasury bonds have such a poor interest rate, even investing in almost safe shares, etc will still generate more money at not much risk.

0 ( +2 / -2 )

Great idea - take money from safe bonds and put it in the pockets of the city fat cats to gamble away and make huge commissions and bonuses on. Another wonderful idea to artificially create 'growth'.

6 ( +11 / -5 )

Watch this dwindle as it gets pilfered, misused, squandered, lost, stolen, wasted, pocketed, diverted and generally frittered away.

Pension fund managers will be licking their chops and dribbling on the floor at the prospect of having all this money to do with as they please, mostly stolen and into their pockets.

6 ( +9 / -3 )

Now, let's watch all the fund managers waste it away on backroom dealings & "entreatment" expenses...

2 ( +4 / -2 )

Remember that because Japanese treasury bonds have such a poor interest rate, even investing in almost safe shares, etc will still generate more money at not much risk.

That's true, but it doesn't seem to be completely clear what restrictions will be in place or who will be responsible for the selection of assets. With a conservative manager, it could work, but with anyone else, it could be a mess.

2 ( +2 / -0 )

even such 'good' news didn't support Nikkei225 today and lost 150 points.

1 ( +2 / -1 )

DO NOT DO IT. DO NOT LET THE UK OR USA OR THEIR ILK ANYWHERE NEAR IT. Germany, perhaps, their model is 'safer', exposing this to the risks the lunatics in London and New York will take with YOUR money? NFW.

-2 ( +6 / -8 )

If they are going to invest more funds in the market, which as with other posters above I have strong reservations, since this is the publics money, it would be good to know if they will have ethical guidelines. Or will they be investing in oil companies, Monsanto, the military industry and other corporations doing their best to destroy the planet?

0 ( +2 / -2 )

Why do I now feel that I should start saving money for retirement...

2 ( +3 / -1 )

a shot in the arm for the inflation that Japan so badly needs

Is this a news report, or an editorial? It's like the concept of journalistic impartialism has gone right out the window.

7 ( +7 / -0 )

if you ever want to buy stocks in the nikkei, now would be the time. get in early and get out fast before this cookie crumbles.

2 ( +3 / -1 )

into which almost all citizens pay

A joke. Many of those on contracts or who work for dispatch companies don't pay. I read a report that suggest 50% of those between 20-35 who are supposed to do not pay because they aren't covered by a company plan and don't want to head to city hall to pay the kokumin nenkin. I don't blame them because there really is no punishment for not paying. In a country with a huge retired age, they aren't pay and nor are the housewives who make less than 1.3 million at their hobby or pocket money jobs. Very few folks ARE paying which is why there is a massive issue with the system as it is.

0 ( +3 / -3 )

It is not clear who would take the responsibility for the possible risk incurred...no responsibility. Shogani.

0 ( +1 / -1 )

Looks like Wall Street, London and its ilk has got its drones on here thuming our sanity down. This really IS a very BAD move. It's OUR money, do NOT give it the lunatics who have no morality!

1 ( +4 / -3 )

The tax payers take responsibilty - or at least deal with the fall out.

-2 ( +1 / -3 )

Sorry, that should've been "entertainment" expenses"

0 ( +0 / -0 )

Privatise profit. Socialise cost. Don't you 'love' capitalism? The whole system was on its bloddied knees in 2008, we bailed THEM out, now they are at it again. Margin call. Watch it.

2 ( +4 / -2 )

No No No. If this happens, I am stopping paying my pensions.

2 ( +3 / -1 )

Juice the stock markets

Monetize the debt (bank of Japan buys the bonds)

Turn on the spiral of inflation

I still can't fathom why ANYBODY would think that increasing energy prices, (imports) is a GOOD thing. How can you expect to help the economy by FORCING people to pay MORE for gasoline and their electric bill.

This is just pure nonsense, both Abe and his lapdog who wrote this article that thinks it's a GOOD thing.

The Yen will be absolutely WORTHLESS before the decade is over.

All part of the big plan I suppose.

1 ( +2 / -1 )

Spin the wheel and hope for the best. If the worst happens, we can always go back to dumping our elderly in the forests.

1 ( +2 / -1 )

This will be uncharted territory for any of the Japanese financial people. I hope they're seeking advice from some of the successful money managers from other countries. They should be able to improve on the current low returns, but I question whether there are any people with experience in Japan of such extra-ordinary situations. It's not a question of intelligence, Japanese have that, it's a question of experience/wisdom. I wish them luck.

0 ( +0 / -0 )

How about letting the contributes manage their own money?

0 ( +2 / -2 )

OMG....the initial injection of such large amounts of cash is going to insane......hmmmmm time to shift more of my portfolio into stocks.....

-2 ( +0 / -2 )

Unshackle? Shouldn't that be gamble?

0 ( +0 / -0 )

And now Japan's economy will collapse, according to the debt hawks.

Remember? Once the bonds lose their captive market, then we get skyrocketing interest rates, then the gov't can't afford to service its debt. Then default,.... and boom!

The vast majority of you posters commenting on this issue - and who argued with me about it -- have repeatedly predicted this scenario over the last couple of years, so enjoy: your time has come.

(I'm one of the very very few who reject this default theory, as indicated by all the minus marks I receive. Let's see who turns out to be right)

0 ( +1 / -1 )

Japan has to do something because too much of it's budget goes towards pensions.

1 ( +1 / -0 )

DAWGG,

Yes, the government should start cutting the pensions immediately. The distribution of financial assets in Japan is heavily weighted in favour of the elderly. Government indebting their grandchildren and unborn great-grandchildren to pay them hefty pensions today doesn't make any sense, except politically.

JeffLee,

The Government still has a captive market - the BOJ.

And outright default is only one possible outcome. Paying the debt off with depreciated currency, or confiscating financial assets (as Japan has done in the past) are others. Different poisons, but none of them would taste any good.

Or everything might go just swimmingly.

I don't think infinite amounts of debt is undoubtedly sustainable, so I've got my insurance sorted out, and will thank my lucky stars on the way to heaven should I die before I am truly glad I have it.

0 ( +1 / -1 )

So "they" are expecting more and better returns by risking more. Does this mean the retirement pay will look better too in the years to come? And "fxgai" .... "cutting the pensions immediately"? Do you know how much a retiree gets over here, I mean average? I am sure, that most people (without their own property) just make month's end! I strongly assume that if this plan works most of the money will disappear again in "somone's" pocket.

-2 ( +0 / -2 )

"Paying the debt off with depreciated currency, or confiscating financial assets (as Japan has done in the past) are others."

OK, I'm watching to see if those things happen. But the yen has to fall into unprecedented range for you to call victory.

0 ( +0 / -0 )

klausdorth,

I don't know the break down of pensioners with their own property versus those without, but I'd hazard a guess that most do have their own property.

One fact I do know is that Japan's individual wealth is heavily concentrated amongst the elderly (this is true relative to other countries as well). So I don't see why Japanese pensioners need such lavish handouts. Some news recently that I saw indicated the pension for a typical retired couple is currently something like 67% of the average wage. If they already have property then that's pretty darn good. Pension simulations conducted recently have suggested that (if everything turns out really well) pension levels will be maintained at about 50% in future. If 50% is good enough in future, why isn't it good enough now?

I don't see that it makes sense for the government to go further into debt to give people money they can do without. With a shrinking working age population Japan can no longer afford to treat it's well-off pensioners like VIPs.

JeffLee,

the yen has to fall into unprecedented range for you to call victory.

Well it's not a competition for me, I just don't want to see my life go down the drain, should the chickens come home to roost. Should Bad Stuff come to pass the last thing on my mind would be coming to JT to gloat about it!

-1 ( +0 / -1 )

I don't see why Japanese pensioners need such lavish handouts. ..... I don't see that it makes sense for the government to go further into debt to give people money

You do realise that the pension is not welfare? It's not a handout, and it's far from lavish. Pensioners are not being given anything; they're being paid back the money they paid in during their working years. (With the exception of the wives of sararimen who never worked in their lives, never paid a red yen into the system and are somehow entitled to as much of a pension as the self-employed who have paid kokumin nenkin premiums all their working life)

Japan's individual wealth is heavily concentrated amongst the elderly.....So I don't see why Japanese pensioners need such lavish handouts

So, according to you, if Pensioner A works hard all his life, earns a tidy bit, lives carefully, saves and accumulates a nice little nest egg, while Pensioner B, who earned just as much but spent it all on, who knows, gambling, foreign holidays, gourmet food, the good life, and reaches retirement with nothing in the bank, Pensioner A should be denied any access to the pension he paid into all his life, and Pensioner B deserves a 'handout' because he's destitute?

3 ( +3 / -0 )

Cleo, well said - including the comment about he hosuewives who have never paid a penny. If they want reform, stop giving women who have never paid a yen a pension. Would save billions a year.

0 ( +1 / -1 )

cleo, tmarie,

My understanding is that it's NOT the case that pensioners are getting back the money that they "paid in". Their pension payments are dependent on tax revenues from today's workers, and money the government borrows to cover it's budget deficit. (To an extent GPIF money is used to pay pensions as well, but it's just a big fund, it's not like the money you paid in will come back out to you later.) When today's pensioners were working age, their taxes were paying to support pensioners of that era, and it was fine while the population was increasing.

So I'm not saying cutting lavish pensions is "fair" for pensioners who worked and paid their taxes. I am saying that the current system looks completely unsustainable, and something needs to be done about it. It SHOULD be based more on a system of what you pay in you get out, so that each generation pays for themselves, rather than the current system of borrowing from the future.

Pensioner A should be denied any access to the pension he paid into all his life, and Pensioner B deserves a 'handout' because he's destitute?

Pensioner A and B are both reliant on the taxpayers of the day (and government borrowing) for their pensions, under the current system.

0 ( +0 / -0 )

Well folks, there goes your old age pension. Bet your last Yen that those "managers" will be sweet talked into investing in some wild idea by the big brokerage firms and loose everything.

1 ( +1 / -0 )

"Their pension payments are dependent on tax revenues from today's workers,"

Not really. When Japan pays pensioners, it doesn't conduct a transfer from one account to another. It simply electronically credits the pensioner's account. So even if a pension fund runs dry, Japan will still have the ability to meet this obligation.

Those funds, like any govt fund by a fiat currency nation, is a bunch of numbers on a spread sheet.

The only thing to worry about is whether Japan's socio-economic system becomes seriously dysfunctional. Otherwise, you're safe.

0 ( +1 / -1 )

My understanding is that it's NOT the case that pensioners are getting back the money that they "paid in". Their pension payments are dependent on tax revenues from today's workers...it's not like the money you paid in will come back out to you later.

Obviously it isn't the exact 'same' money (as in, write your name on the note you use to pay your premium, and recognise the exact same note with your name on it when you get it back decades later), but it is the system that you pay in while you're earning, and take out when you retire.

I'm not saying cutting lavish pensions is "fair" for pensioners who worked and paid their taxes

They didn't only pay taxes. They paid pension premiums, on the understanding that when the time came they would get a pension. It isn't a 'handout', and it isn't 'lavish'.

When today's pensioners were working age, their taxes were paying to support pensioners of that era

Again, not only taxes (which also went to pay for the education/health care etc. of the current working population) but also pension premiums. When the baby boomers were paying in there was a huge surplus that should have been invested and grown in preparation for their retirement; instead it was used to build empty boxes up and down the country that filled the bank accounts of the politicians of the day and their business friends.

It SHOULD be based more on a system of what you pay in you get out, so that each generation pays for themselves, rather than the current system of borrowing from the future.

On paper it sounds sensible, but how do you propose to change the system? From tomorrow, the pension premiums of today's working generation starts being set aside to pay for their own pensions, great. So how do you pay the pensions of today's pensioners, who have already paid in but the money has been spent supporting their parents? You're going to just chuck a generation on the rubbish heap? Expect them to live on fresh air? Or just die sooner rather than later, leaving their property to the younger generation, slowing down the ageing of society and thus killing several birds with one stone?

0 ( +1 / -1 )

Cleo Jun. 18, 2014 - 08:12AM JST Obviously it isn't the exact 'same' money (as in, write your name on the note you use to pay your premium, and recognise the exact same note with your name on it when you get it back decades later), but it is the system that you pay in while you're earning, and take out when you retire.

The first solution is to put more money in the pot. The trouble with the taxpayer solution is that we are tapped out. Even if stagnant wages we could up with a lot more money, none of us are exactly keen on paying higher taxes to pad the retirement benefits of workers. The second possible solution to the pension mess is to take less money out of the pot, meaning decrease benefits. A third possible solution is under this scenario, what money is on hand to cover pension promises is invested in financial markets, which defy past performance and economic reality to provide such stellar returns that under-funding magically disappears. Once again, public pension plans, as well as endowments and foundations, are increasing asset allocations to risky funds.

1 ( +1 / -0 )

Well said Cleo.

A suggestion? Stop giving pensions to people who have themselves paid a penny into the system. Start that from tomorrow and state that anyone now from the age of 20-40 who hasn't paid a dime gets nothing. It won't help right now but if these folks (cough, women, cough) went out and found a job at the age of 40 or paid kokumin nenkin, they'd be well within their "right" to one. As it is now, why this country pays billions to leeches who such from the system is beyond me. Whose got the balls to make that change though? Abe's been talking about it but will he do it?

0 ( +1 / -1 )

tmarie Jun. 18, 2014 - 08:36AM JST A suggestion? Stop giving pensions to people who have themselves paid a penny into the system.

Japan is a cold society. Is this what you want? A 79-year-old widow was threatened with loss of welfare benefits unless she got rid of her air conditioner. She did, then collapsed in her apartment during the next heat wave and had to be taken to the hospital, where she spent six weeks recovering.

Japan has a welfare system that in some ways make American system seem a model of generosity. Applicants in Japan are obliged to get help first from their families, and a poor person physically able to work is not eligible for help, whether or not the person actually has a job. In Japan, there is a greater sense of family obligation and an abiding sense of shame that colors almost every aspect of life. The system in Japan almost never breeds dependence, and the Japanese approach has emphasized the work ethic and the importance of family ties. The welfare system seems to have broad public support in Japan. It is financed by the taxpayers, so the standards are very strict. Japan has no food stamps and relies principally on a single program of small cash grants.

0 ( +1 / -1 )

Japan has a welfare system that in some ways make American system seem a model of generosity.

The topic is the pension system, not the welfare system. I pay into the pension system, and I hope to get a pension, though it will be a small amount.

3 ( +3 / -0 )

cleo,

On paper it sounds sensible

I see we can agree there is a problem.

but how do you propose to change the system?

To start, the amounts that are being paid out in pensions should be reevaluated. You appear to disagree, but I believe they are lavish. As I noted above, the elderly in Japan have a greater proportion of wealth than their cohorts in western nations. According to statistics I checked, close to 90% of elderly pensioners in Japan own their own property (far greater than in western nations) so they don't even need to pay the rents. I hear also that health care is free for the above-80's. Yet the number I saw on TV recently as a typical household pension struct me as being easily more than enough to pay for food, energy and what-have-you - my household expenses would easily be covered by it.

Once Japan has figured out what it can afford to pay, then it can think about how to transition to the more appropriate model, but the first step even hasn't been tackled yet.

Rather than transfering so much from the working population to the elderly, the amounts should be reduced such that the numbers are compatible with people's actual needs and also fit the stature of Japan's economic situation today and in the future. If Japan were sitting on massive elephant oil fields then by all means it could keep paying out as much as it likes. But realities have to be faced.

Alas the people who receive the pensions today not only have the bulk of the wealth they also have the bulk of the political might. Unless they themselves face the problem squarely and commit to not screwing over the working generation of today and tomorrow, things don't look good. It's no wonder that polls are showing the vast majority of people already do not believe that the government will actually be able to produce pensions of the size that they are saying people will get in future. Making the system more appropriate and realistic would be more believable and may actually provide more certainty to a public and make them feel better and provide a boost to the economy as a result.

Farmboy,

I hope to get a pension, though it will be a small amount.

Good luck with that. I have the "fxgai" pension fund up and running and I fancy it's chances far more than I do ever getting a yen from the government of this place under the current system.

0 ( +0 / -0 )

take less money out of the pot, meaning decrease benefits

Pensions are not 'benefits' or 'welfare'.

As it is now, why this country pays billions to leeches who such from the system is beyond me. Whose got the balls to make that change though? Abe's been talking about it but will he do it?

When the DPJ came to power one of the first ideas they floated was to stop the free-pensions-to-wives-of-sararimen handouts. Despite the fact that more people would gain from this than lose (whether in the form of lower premiums for those paying in, higher returns for those who have paid in, or just general fair do's) it was one of the cudgels that the LDP used to beat the DPJ senseless at the election - 'threats to traditional family values', 'bring back Japan' and all that - and now Abe is saying he wants to do it? Ha. I'll believe it when I see it. Politicians will say anything if they think it will get them through the day.

A 79-year-old widow was threatened with loss of welfare benefits

Nothing wrong with supporting penniless widows through welfare, and removing her zircon is just petty. But I wonder how much the widow paid into the pension scheme when she was younger? How much of a pension is she drawing? Why is she penniless now? Don't confuse welfare with pensions. There is no reason anyone with a decent pension should need welfare.

0 ( +0 / -0 )

sfjp330, welfare and pension are NOT the same thing. Many of the women collecting pension do not "need" it as they live a nice life because their husbands worked their balls off and saved. This country is giving billions away to middle class and upper middle women who have never paid a penny into the pot. Japan can not continue to support such leeches. I have zero problems helping those in need. I have a lot of problems funding cake sets and coffee and ikebana classes for a group who has never paid a penny into a failing system they are abusing.

Cleo, I agree. He's talked about it but let's be honest, he's an idiot but I don't think he's THAT dumb. Lord, the princesses would be up in arms. A "threat" to family values! Ha!

-3 ( +0 / -3 )

tmarie Jun. 18, 2014 - 08:36AM JST A suggestion? Stop giving pensions to people who have themselves paid a penny into the system. Start that from tomorrow and state that anyone now from the age of 20-40 who hasn't paid a dime gets nothing.

It touches on contract law. A promised pension is a contract, and cutting benefits would likely trigger a challenge on that front as well. Sure Japan is grappling with the problem of underfunded public pensions. The J-goverment need to renegotiate future pension and retirement benefits.

2 ( +2 / -0 )

There is no such thing as a "promised pension" to someone who hasn't paid - hence why millions of contract workers and the like are going to have a rough go when they hit retirement age in the new few generations. Pensions are not a "benefit" for those that don't work unless they are married. Single non working folks don't get anything if they don'T pay. Nor should those who are married who are not working and /or not paying.

-3 ( +0 / -3 )

There is no such thing as a "promised pension" to someone who hasn't paid

Actually there is when the law states that one particular section of the population (non-earning wives of sararimen) will be entitled to a pension when they hit 65. Without that promise, presumably the women (if they have any sense) would have enrolled in some private pension scheme - probably paid for by hubby, but there's no problem with that. Or they could have had a little PT job to cover their own premiums.

You can't tell someone 'Yes you will have a pension in your old age, don't worry' and then when they're past middle age or whatever, suddenly say you've changed your mind. These things need planning. Just like raising the pension age from 60 to 65 couldn't be done at a stroke; it needed a timetable set out in decades, not years. (and even so they didn't manage to get the companies to keep up, and they're still 'retiring' people at 60)

I agree with your suggestion of starting from tomorrow; we can't change the past. So a stay-at-home lady aged 40 who married at 20 (for easy reckoning) has 20 years' 'credit'; the pension kicks in at 25 years, so if she wants a pension she has to pay at least 5 years' premiums, 20 years' if she wants the full pension. Of course this wouldn't be 'fair' on the younger stay-at-homes who would have to pay the full 25-40 years' worth, but then up until now it hasn't been fair on working wives, the self-employed, etc., who have paid in and will get no more than the stay-at-homes, or on the men whose own wives work (so no free pension, no free health insurance, no tax allowances) yet they have to contribute to the free pensions of other men's wives. Not to mention the singles and the female sararimen who get stung every which way.

1 ( +1 / -0 )

Sorry Cleo - that should say unmarried!

100% agree with your suggestion - though do want the 40 year old to start paying! I'd be willing to met you half way. 30 years old?

-3 ( +0 / -3 )

tmarie - In my plan they'd all start paying tomorrow, the 20-year-olds, 30 year-olds, 55 year-olds. (Like I said, the 40 year-old was for easy reckoning). No credits at all for those under 30 (or 35, even) wouldn't give me any sleepless nights. They have plenty of time to make it up.

1 ( +1 / -0 )

But that's my point - the 40 years olds also have the time to make it up - and few probably have small kids at home to tend to so... They can get a job - PT is fine as the payments aren't that much a month - or hubby can pay for them. I think everyone should pay or do without unless you are someone who needs support like welfare.

-4 ( +0 / -4 )

the 40 years olds also have the time to make it up

They can make up the minimum 25 years if they start now, but they're not going to make the full 40 years. There could also be the option to pay retrospectively. Of course they can either get a PT job to pay the premiums, or get hubby to pay if he wants his slippers warmed and dinner on the table when he gets home.

I think everyone should pay or do without unless you are someone who needs support like welfare.

I think we're saying the same thing....

But I would put in a clause exempting one or other of the parents of small children (up to elementary school entry age or junior high entry age or somewhere in between, the details would be negotiable) from paying kokumin nenkin pension premiums, whether they were in paid employment or not, as encouragement to raise the birth rate.

0 ( +0 / -0 )

I 100% agree with you on the clause for kids up to three or four. However, if the kids are in kindy, no go. If families can afford the kindy fees, they can afford to kokumin nenkin. Schools would have to change their policies and whatnot as well which would help working mothers.

The don't need to make up 40 years though - just need the 25 if I am not mistaken. Hubby can pay or she can get a job.

My welfare comment was just because of the one above that accused me of wanting a cold society. I'm all for helping those in need but I am tired of propping up able bodied, well educated women to stay home and leech off a broken system.

-4 ( +0 / -4 )

It isn't about whether they can afford the kokumin nenkin or not; it's about encouraging families to have more kids. But as I said, the period of grace is negotiable.

The don't need to make up 40 years though - just need the 25 if I am not mistaken

Yes, they only need 25 years to get the minimum pension; but if they've got as far as middle age with the promise of a full pension, you can's just kick the stool out from under them when it's too late for them to make up the difference. (Though like you, I would like to see those who have paid in nothing, get nothing out; but the government cannot just wipe the slate clean and start afresh.)

-1 ( +0 / -1 )

I don't think there is much they can do at this point to encourage more kids except build more daycares and demand that companies follow the laws with regards to pat and mat leave - and perhaps "make" dads take leave - and make sure women get their jobs back after taking leave. So many of my female students don't want to get married because they feel if they do they "have" to quit working. Without more daycares and leave, this is sort of the case for some. Not all though.

To me it is about them being able to afford it or not. I think if Japan got rid of the 1.3 millon salary cap and made women pay their pension, more would return to work. I would love to kick the stool but know it won't happen. Heck, I don't see any reforms actually happening - in terms of immigration, mat/pat leave, child care, day care, pension.... Japan is too far gone and there are too many vested interests to shake the tree. Not going to be pretty here in 40 years but I'm hoping to be gone and am saving my pennies because I don't expect much even though I pay more than your average family of four does in terms of taxes. So does my husband.

-4 ( +0 / -4 )

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