Catherwood LibraryILR School

Struggling with an economy mired in the doldrums (see WIT for Feb. 4, 2003), an ageing workforce, and a shrinking population, the Japanese government has cut pensioners' benefits by almost one percent as prices and wages continue to fall. Exacerbated by an eighty-percent decline in investments in the Japanese stock market and almost nonexistent yields on government bonds, the deflationary cycle in Japan resulted in the national pension system recording a $6.7 billion deficit last year---its first ever---that is expected to climb to $27.7 billion this year. The move by the government brings to Japan's previously ironclad final salary pension plans the reductions in benefits that have been sweeping across the U.S. and Europe (see yesterday's WIT's), and is only the tip of what is shaping up to be an immense iceberg of pension cuts in both the public and private sectors in Japan.