ESRI Discussion Paper Series No.253
Japan's Public Pension:
The Great Vulnerability to Deflation

Mitsuo Hosen
Executive Research Fellow, ESRI


Deflation since the mid-1990s has had a serious negative impact on the Japanese economy in many respects. This paper focuses on the financial vulnerability of Japan's public pension schemes to deflation. It is demonstrated in the paper that deflation made real pension benefits substantially higher than originally planned, and thus considerably worsened the financial conditions of the country's public pension schemes. This development also has serious implications for intergenerational distribution, since the younger and future generations need to bear the costs of these higher pension benefits at a later stage. Needless to say, ending deflation is a top priority, but at the same time it is imperative to improve Japan's public pension schemes to avoid being financially impaired by deflation.

Structure of the whole text (PDF-Format 2 File)

  1. full text別ウィンドウで開きます。(PDF-Format 134 KB)
  2. page1
  3. page2
    1 Introduction
  4. page3
    2 Provisional Treatment and Its Impact on Real Pension Benefits
  5. page7
    3 Automatic Adjustment Mechanism Not Activated
  6. page8
    4 Automatic Adjustment Mechanism After Activation
  7. page9
    5 Quantitative Assessment
  8. page14
    6 Sustainability of Public Pension Schemes Under Different Economic Conditions
  9. page17
    7 Conclusion
  10. page18
  11. page20
    [Appendix 2] A Bold But More Realistic Estimation of Real Overpayments
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