A proposed reform to better link pension payments with movements in wages should improve the viability of Japan’s public finances. For current workers though, the reform may force them to delay retirement even longer. Japan has an older population than any other country. The ratio of those aged 65 or more relative to those of working age was 43% in 2015, the highest in the world. This ratio is set to rise to around 70% by 2050. But Japan’s spending on public pensions is not particularly large. In 2013, the government spent 10.7% of GDP on pensions, less than the 12.6% in France and the 13.7% in Italy. The corollary is that the pension system is not generous. The average retiree’s pension is equivalent to only 35% of pre-retirement earnings, while the age at which workers can claim a full pension is on the high side at 65. As a result, many workers delay retirement. Between 2009 and 2014, the average effective retirement age for men was 69.3 for men and 67.6 for women.
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