The OECD's oldest society (29.6% aged 65 and over in September 2026) spends less on pensions than France or Italy: one of the latest exits from work, a giant reserve fund and an automatic adjustment mechanism that trims pensions in real terms keep the system balanced — at the cost of a replacement rate set to fall.

A two-tier public system. All residents aged 20 to 59 contribute to the flat-rate National Pension (kokumin nenkin); employees are also covered by the earnings-related Employees' Pension Insurance (kōsei nenkin). Company plans and tax-advantaged individual savings (iDeCo) come on top. The normal pension age is 65; claiming is possible from 60 with a reduction, and deferral up to 75 with an increase.

Contained public spending. According to the OECD SOCX database, public old-age pensions (cash benefits) amounted to 9.2% of GDP in 2022, and private pensions to about 2.7% of GDP in 2021. This OECD scope is not Eurostat's (ESSPROS, used for European countries): the two measures must not be confused.

People work for a long time. The average effective age of labour market exit reached 66.9 for men and 67.4 for women in 2024 (OECD), above the statutory age. In 2025, 26.0% of people aged 65 and over were in work, and 54.5% of those aged 65-69 (Statistics Bureau, a record); the 9.43 million older workers make up 13.8% of all employed people. But 76.1% of employees aged 65 and over hold non-regular jobs, often lower-paid after mandatory company retirement at 60 or 65.

A scheduled decline in pension levels. The 2024 five-yearly financial verification (MHLW) puts the replacement rate of a model household — a full-career employee and a spouse at home — at 61.2% of average net earnings of workers for fiscal 2024. Since 2004, the so-called "macro-economic slide" has held back the indexation of pensions to wages and prices in line with the shrinking number of contributors and rising life expectancy.

Indexation below prices. For fiscal 2026, the basic pension rises by 1.9%, the fourth consecutive annual increase (government, January 2026); it nevertheless remains below the inflation rate used in the calculation, which means a cut in real terms. Meanwhile, the public reserve fund GPIF returned 16.47% in fiscal 2025 (April 2025 – March 2026), a gain of ¥41.4 trillion, with assets of ¥293.6 trillion at end-March 2026.

Unmatched demography. On 15 September 2026, Japan had 36.24 million people aged 65 and over, 29.6% of the population, a record (Statistics Bureau); those aged 75 and over already account for 17.7%. According to the World Bank, there are about 51 people aged 65 and over for every 100 people aged 15 to 64 (2025 estimate).

The 2025 law widens the contributor base. Passed in June 2025, the pension reform extends employee insurance to part-time workers: the ¥1.06 million annual income threshold is removed and the firm-size criterion is phased out between October 2027 and October 2035 (MHLW). Since April 2026 it has also raised the ceiling above which the pension of working retirees is suspended, from ¥510,000 to ¥650,000 a month, and from 2028 it gradually removes gender gaps in survivors' pensions.

Strengthening the basic pension postponed. The most debated measure — using part of the employee scheme's reserves to halt the decline of the basic pension — was included only in principle, at the opposition's request, and will be decided in light of the next financial verification, due in 2029. The Takaichi government mainly emphasises lowering social contributions for workers; no new pension reform was under way in early November 2026.

Projections conditional on growth. According to the 2024 verification, the model household's replacement rate would stay above 50% in every scenario, between 57.6% (growth scenario) and 50.4% around 2057 (a scenario extending the past thirty years). These projections depend heavily on productivity and on the employment of women and older people.

Open questions. (1) How to protect retirees who receive only the basic pension, often women and former self-employed workers; (2) how far to push work beyond 65 without deepening precarity; (3) how to share the cost of ageing between generations.

Set among its peers, Japan combines the oldest population with mid-range public pension spending, made possible by late exits from work and less generous pensions than in southern Europe.

Three takeaways. (1) Spending: less than Europe, more than the English-speaking countries. At 9.2% of GDP (OECD SOCX, 2022), Japan sits below Germany (10.8%, 2021), France and Italy, but above the United States (7.3%, 2023) and especially Korea (3.8%, 2022), whose system is younger.

(2) One of the latest exits. Japanese workers leave the labour market about five years later than the French (61.9 for men in 2024) and two to three years later than Germans; only Korea and, for men, the United States match or exceed it.

(3) Balance through automatic adjustment. Where France and Italy debate statutory ages, Japan chose in 2004 to adjust pension levels first: a solution that stabilises the accounts but shifts the risk onto the purchasing power of future retirees.