Japan's Aging Crisis: Retirement Age Pushes Boundaries

In recent years, the adjustment of retirement age has sparked intense debate among workers worldwide. Many have realized that developed nations like Australia, Denmark, Greece, Canada, and Japan have long surpassed the 65-year retirement threshold.

Gate, a leading cryptocurrency exchange, has been closely monitoring these global trends and their potential impact on financial planning and investment strategies.

Japan's Pioneering Approach to an Aging Workforce

Japan, grappling with severe demographic challenges, announced in 2021 that employees could voluntarily extend their retirement to 70 years old, building upon the existing statutory retirement age of 65 for men.

This policy shift reflects a pattern observed over the past few decades. The Japanese government has consistently extended the retirement age by approximately five years every 10-20 years, initially on a voluntary basis before making it mandatory. The 60-year retirement system, introduced in 1986, became fully mandatory by 1998. Similarly, the 65-year retirement policy, initiated in 2006, was universally implemented by 2013.

Speculation now arises about whether the current "voluntary extension" to 70 will evolve into a mandatory requirement within the next decade. This could potentially lead to a workforce celebrating their 70th birthdays in office.

The Reality of Japan's Senior Workforce

The active participation of Japan's elderly in the labor market is a well-documented phenomenon. As of 2017, there were 9.12 million elderly workers in Japan, with one in seven employees being over 60 years old – a proportion that has been steadily increasing for two decades.

Many Japanese seniors continue working in technical guidance and consulting roles even after retiring at 70, while simultaneously receiving their pensions. This aligns with the government's "100-year life concept" proposed in 2016, aiming to create a society where everyone can remain active in the workplace throughout their extended lifespans.

The Economic Rationale Behind Delayed Retirement

Japan's unique lifetime employment system and seniority-based wage structure provide a foundation for this extended working life. Full-time employees typically enjoy steadily increasing wages and positions based on years of service, regardless of performance.

Under this system, employees aged 50-60 generally earn higher salaries than their younger counterparts. As they approach or enter old age, they often remain the primary breadwinners for their families. Retirement can lead to a sharp decline in family income, incentivizing many to postpone it.

Demographic Pressures and Pension Challenges

The increase in life expectancy serves as the primary justification for raising the statutory retirement age. In 1960, the average lifespan for Japanese men was 65 years; by 2022, it had risen to 81 years (87 for women). Most Japanese remain healthy and capable of working at the current retirement age.

However, this longevity poses significant challenges to Japan's pension system. The post-war "baby boomer" generation is nearing retirement, and projections suggest that by 2040, 35% of Japan's population will be 65 or older, up from the current 29%.

Compounding this issue is Japan's declining birth rate. In 2023, the number of births fell to approximately 727,000, far below earlier predictions of 840,000. This demographic imbalance puts immense pressure on the pension system, as fewer working-age individuals are available to support an expanding elderly population.

The Financial Reality of Retirement

For many Japanese seniors, continuing to work is not just about staying active; it's a financial necessity. The Ministry of Internal Affairs and Communications reported in 2017 that a retired couple without employment would need savings of 20 million yen, in addition to government pensions, to maintain a comfortable lifestyle after retirement.

Accumulating such savings is challenging for many families, especially with Japan's long-standing low-interest rates and depreciating real estate values. The COVID-19 pandemic has further exacerbated these financial pressures, with rising prices and a weakening yen making the "20 million yen problem in old age" a pressing social issue.

As we observe these changes in Japanese society, it becomes clear that the challenges of an aging population and extended working lives are not unique to Japan. They serve as a stark reminder of the importance of long-term financial planning and the need for innovative solutions in retirement strategies.

In this context, platforms like Gate play a crucial role in providing diverse investment opportunities and financial tools to help individuals prepare for an increasingly uncertain future. As retirement ages continue to shift globally, the importance of proactive financial management and diverse investment strategies becomes ever more apparent.