Key facts
- Foreign residents in Japan are contributing to the national pension system at approximately half the expected rate.
- The national pension system requires all residents aged 20-60 to participate, regardless of nationality.
- The fiscal health of Japan's pension system is directly influenced by the number of foreign residents.
- A record 3.41 million foreign nationals lived in Japan as of the end of 2023.
- Departing foreigners can claim a lump-sum withdrawal payment to recover a portion of their contributions.
- Non-payment of pension premiums may lead to visa renewal denial from June 2027.
Japan's national pension system is facing challenges due to low participation rates among foreign residents, with official data indicating they contribute at only about half the expected level. This situation underscores the difficulties immigrants encounter in navigating the country's complex government benefits bureaucracy.
Japanese law mandates that all residents between the ages of 20 and 60 must join the national pension system, irrespective of their nationality. As of the end of 2023, Japan hosted a record 3.41 million foreign nationals, who not only help address labor shortages but also play a crucial role in supporting the nation's pension system. Permanent residents constitute the largest group, numbering approximately 890,000, followed by technical intern trainees at around 400,000.
A fiscal assessment released on July 3 revealed that the amounts of pension benefits in Japan are significantly influenced by the number of foreign residents. A Chinese woman, who came to Japan 20 years ago and now runs an IT firm, shared that while her monthly pay was 230,000 yen, deductions for employee pension and health insurance premiums reduced her take-home pay to 200,000 yen. She viewed these payments as a duty but expressed concern that such deductions could make hiring foreign personnel less competitive, especially with the weak yen.
Based on figures from 2016-2019, the latest fiscal assessment projects a net annual inflow of 164,000 foreigners until 2040. Under this scenario, the income replacement ratio, a key indicator of the pension system's fiscal health, is expected to be maintained at 50.4% in fiscal 2057. However, Professor Kohei Komamura of Keio University noted that birth rate recovery and foreign influx are uncertain elements. In a low influx scenario (around 69,000 per year), the income replacement ratio could fall to 47.7% by fiscal 2062, below the government's 50% target.
Meanwhile, the number of foreigners claiming lump-sum refunds upon leaving Japan is on the rise, with approximately 96,000 individuals doing so in fiscal 2021. Japan's pension system offers departing foreigners a lump-sum withdrawal payment to reclaim a portion of their contributions. Additionally, if a foreigner's home country has a social security agreement with Japan, they may be able to count their years of contributions in Japan toward a pension in their home country. Starting in June 2027, failing to pay pension premiums can result in the denial of visa renewals, making non-compliance a risky strategy.