[Part I] The Japanese Pension System: What It Is and How It Works

So, you’ve been working for several years already here in Japan, or even as a newcomer, you might be asking about where the money deducted from your salary goes and what it’s for. The thing is, even if you get a hold of the official documents and explanations on this topic here in Japan, chances are the material’s (translation) simply going to bore you out or confuse you all the more.

In this post, we will give you the breakdown on what’s the deal with Japan’s pension system, and the basics that you need to know about it as a foreign national living in the country.

Japan’s Pension System: A Deeper Look

First off, it’s important that we categorize where everyone is in the system, in order to have a clear picture of how the whole thing works and how it will affect you as part of the system:


  1. An individual who is self-employed, works part-time or works at a company or organization which is not covered by insurance because it has less than five employees.
  2. An individual who works full time, or covers 75% of what is considered full-time work at a company (e.g. 30 hours a week or higher, if the ordinary work hours per week are up to 40 hours in total).

What is the Japanese Pension System:

There are two kinds of pension (nenkin) for which every working individual in Japan, including foreigners (on temporary working, spousal, or permanent residence visas), is subjected to enrol. The fund gathered by the pension system is managed by the Japanese Pension Service, a government agency regulated by the Ministry of Health, Labour, and Welfare. The plan that you pay into the system is dependent on the type of work contract you are given:

  • The kokumin nenkin or the National Pension plan
  • The kosei nenkin or the employee’s pension insurance plan

The main difference between the two is that individuals under the first category have to pay higher contributions, which means a bigger payout from their pension in the future. The reason for this is that companies belonging to the first category evens out their payment, yen for yen, on a monthly basis, then adds this to the individual’s pension stash. If an individual is under the second category, he/she also has the option to pay into the National Pension plan, for a higher payout upon retirement.

Once you have enrolled in any of the two pension schemes, you will be given a pension handbook (nenkin techou). It’s important that you get a hold of this document whenever you want to access your pension records. If you lose it, you can simply apply for a new one, but as with anything of importance, it’s always best that you have the original.

What Do I Need to Pay and How much?

  1. The national pension scheme is a mandatory plan that everyone else who doesn’t have premiums deducted from their pay (i.e. part-timers), Japan residents who are not paying into the employee pension scheme, or those who no longer could work. The monthly contribution minimum is JPY 16,340 (for 2018) that the individual must pay for himself either through monthly or quarterly bills. Students are allowed to request for extension on their payments for the national pension.
  2. All individuals working full-time (or any employee who works three-quarters of full-time work), are required to pay into the employee pension system. The amount is automatically deducted from the employee’s monthly pay and is transferred to their pension fund, where 9.15% of their monthly salary goes to.

Can Expats be Exempted?

There is no exemption in Japan’s pension system. This means everyone has to contribute into the national fund, but certain people can apply for lower contribution shares such as those who are disabled or unemployed. The request can be made through the individual’s local municipal office and can be filed once a year.

And even if foreigners are required to shell out their money in the country’s pension system, they can, however, reclaim some of it upon leaving the country.

If a foreigner has worked in Japan for several years already, and then he/she leaves Japan and then after years later decides to come back, the pension contributions from back then will still be on record so they can continue their payments as they work once again in the country.

How Does the Monthly Deduction Work?

  1. You will be given an envelope sometime in June, which has all the national pension bills divided into monthly or quarterly payments. You can settle your payments via the post office, bank, or any convenience store.
  2. When you receive your payslip, look under the heading shakai hoken or social security. The deduction also covers health, welfare, long-term care, and employment insurance.


Note: Remember to keep the pay stubs for your payment every month to track how much you’ve already paid into the system.

Why are my Bills Getting More Expensive?

If you work on a number of part-time jobs, then your contributions will be much higher than those who do not by virtue of the computation explained earlier. That is because you will need to pay separate taxes for all of your earnings. You need to keep this in mind if you are considering to become self-employed or if your employer requests you to open up a second bank account.

When an employer asks you to open a second bank account, you need to understand that what they may want to make it appear is that you are being paid two different salaries, when in fact, they are only splitting your pay to make it look that way as this method shifts tax payments off of them and onto you. Obviously, you need to watch out for this as this is illegal, and could hurt your finances in the long run.

Some Japanese companies could also avoid covering their share of your social security costs by designating your employment as past-time. The reason behind this is that full time workers’ social security is covered by their employers (where they cover half the payment costs for your social security). If you are employed with a contract that requires you to work for 29.5 hours or less, then you are doing just as much work as a type A employee, but you are technically classified as a type B employee. Your company will not be obliged to pay for your pension costs, and worse – you may even have to pay more than a type A and get less in return.

Is the Japanese Pension System reliable? How so?         

To answer this question, you need to take a look at a lot of factors. With the rapidly ageing Japanese population, there will be major repercussions on the pension fund allocation if the population keeps up at this pace and if the government seeks to support every single person who’s given contribution into the system.

And just to be 101% sure about where you’re at regarding your bills payment, remember to get information for yourself via the government’s official website or to speak directly with a representative from the local pension service office who can assist you with this kind of stuff. It’s better to get everything covered and well accounted for right off the bat than to receive a crazy amount of bill in the future for all the missed payments you’ve accumulated over time.

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