The growing concern about an impending pension crisis in Japan has arisen from inadequate public, corporate and private pension plans. The primary cause is the rapidity with which the population will age between now and 2010, compared with other nations. Japan faces the most extreme demographic pressure of any developed country, yet the issue of future pension funding is only now being addressed. It has always been difficult to assess the scale of the pension funding problem in Japan because of the lack of disclosure in company financial statements.
This is set to change as of fiscal 2000, when companies will be required to disclose the market value of their pension liabilities. Specifically, firms must combine accounting for off-balance corporate pension funds as well as on-balance retirement allowance schemes and disclose the aggregate funded status in their financial statements.
By 2005, the ratio of active pension participants to beneficiaries in the public systems is expected to drop to 25% from its current level of three to one and continue to drop to around two to one by 2020. The ageing gap is expected to narrow by 2050, so the next 20 years represents a special opportunity for the accumulation and management of Japanese assets. Over the next decade alone, Japanese pension assets are conservatively expected to grow from $3,100bn to $4,100bn. This accumulation will peak in 2030 but the outstanding assets will remain one of the world’s most significant pools of funded pension assets.