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The optimal size of Japan's public pensions: An analysis considering the risks of longevity and volatility of return on assets

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  • Miyazato, Naomi
Abstract
There are two main pension systems: the Defined Benefit (DB) pension system and the Defined Contribution (DC) pension system. Each system has advantages and disadvantages. This paper investigates to what degree Japan should maintain a DB public pension system which offers the benefit of sharing risk and to what degree Japan must adopt a DC pension system to eliminate intergenerational imbalance. The risks of longevity and volatility of return on assets are incorporated into the simulation model. As a result of the simulation analysis, a replacement rate of 20-30% would be adequate for future generations if the expected return on assets and the wage growth rate are at the same level. Meanwhile, if the former is 2% points larger than the latter, a replacement rate of 0% or full-scale privatization would be desirable.

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  • Miyazato, Naomi, 2010. "The optimal size of Japan's public pensions: An analysis considering the risks of longevity and volatility of return on assets," Japan and the World Economy, Elsevier, vol. 22(1), pages 31-39, January.
    • Handle: RePEc:eee:japwor:v:22:y:2010:i:1:p:31-39
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    References listed on IDEAS

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    Cited by:

    1. Akira Okamoto, 2013. "Welfare Analysis of Pension Reforms in an Ageing Japan," The Japanese Economic Review, Japanese Economic Association, vol. 64(4), pages 452-483, December.
    2. Akira Okamoto, 2013. "Simulating Public Pension Reforms in an Aging Japan: Welfare Analysis with LSRA Transfers," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(4), pages 597-632, September.
    3. Toloo, Mehdi & Tone, Kaoru & Izadikhah, Mohammad, 2023. "Selecting slacks-based data envelopment analysis models," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1302-1318.
    4. Masatoshi Jinno, 2013. "The impact of immigration under the defined-benefit pension system," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 28(21), pages 613-636.

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