Retirement Age in Japan: A Guide For Foreign Professionals

Retirement is a big deal for many people. It marks the culmination of years of hard work and the beginning of a new chapter in life.

So, as a foreigner living in Japan (or a prospective resident considering moving here), learning how the retirement system works is crucial.

In this post, I’ll explain the retirement age in Japan (including Japan’s pension policy) and how the system works. And I'll answer the most common questions about retiring in Japan. Now without further ado, let’s start with the "mandatory" retirement age in Japan.

Japan's "mandatory retirement age"

First off: yes, Japanese law allows companies to set a mandatory retirement age. Most companies set this at age 60, although it varies. But remember: having a mandatory retirement age (定年 "teinen") isn't required by law. In fact the law sets the minimum mandatory age a company can set at 60 years old.

Why is this "mandatory retirement age" necessary? Well, Japan has a history of "lifetime employment" and it's notoriously difficult to fire people in Japan. So changing jobs has historically been less common than in a lot of other countries.

That's why many companies set a mandatory retirement age of 60. It gives them a chance to reassess everyone's employment.

However, Japanese residents don't begin receiving pension payments until age 65. In part due to this gap, companies are obligated by law to continue employing people up to age 65 (if the employee wishes to continue working at the company). But they're free to make major changes to the employee's salary and other conditions during this period.

The company is no longer required to provide a job for employees who are ages 66 to 70, but they are still strongly encouraged by the government to create employment opportunities for those who wish to work.

Currently, around 94 percent of companies in Japan have set the retirement age starting at 60 years old. Out of those companies, 70 percent force their employees to retire at 60 years old. In most cases, people “retire” from their old positions at 60 but then, under the employee’s request, they can continue working at the same place in a less demanding role until around 65. 

This usually means that the company will “rehire” the employee under a new contract after their initial retirement. 

Otherwise, people also look for alternative jobs, like ones that don’t require much effort but keep them in a schedule or a rhythm, which gives them a purpose to go on. 

While a somewhat harsh approach to retirement, this system has historically worked for Japan when lifetime employment was the norm and the government wanted to provide more employment opportunities for the younger generation.

However, it doesn’t seem to serve the country’s declining working population any longer, especially as the eligible age for receiving pension is getting pushed later and later.

What Does The Law Say About The Age of Retirement in Japan?

Japan has a separate law for working elderly individuals. It’s called the Act on Stabilization of Employment of Elderly Persons, or ASEEP for short. 

As I explained before, while this law doesn’t set an age limit for the elderly to retire, it does set the age at which individuals become eligible for pension and helps people keep their jobs longer. 

Most importantly, the 8th article of ASEEP bans companies from setting a mandatory retirement age earlier than 60. 

This means that even if your job contract includes a mandatory retirement clause before the age of 60, it will be null and void, effectively lifting the clause altogether.

As I mentioned, the same law, with its 9th article, also protects individuals’ employment status until they start receiving their pension. Let’s elaborate on this.

Employer’s Obligation to Ensure Job Stability Until Pension

Article 9 of ASEEP stipulates that if an employer signs an agreement that includes a mandatory retirement age that’s below 65, they must take one of the following three measures to ensure job stability for their employees:

1. Raising the mandatory retirement age

2. Lifting the mandatory retirement age limitation

3. Introducing continued employment

About 80% of companies have adopted a continued employment system, allowing individuals to work past the mandatory retirement age if they choose to.

The second most commonly taken measure is raising the mandatory retirement age, with about a 17% popularity rate, while only less than 3% of companies have decided to end their mandatory retirement age policies.

Continued Employment System, Explained

As I said, most companies with a mandatory retirement age below 65 have a continued employment system until the employee becomes eligible for pension payments. 

Let’s examine the limitations of this continued employment system from the perspective of the Act on Stabilization of Employment of Elderly Persons.

For starters, Article 9 states that companies are obligated to offer continued employment to all employees who want it, and they aren’t allowed to screen employees who do. If there’s a continued employment system in place, all employees benefit from it.

Another important condition regarding an employee’s entitlement to continued employment has to do with the place of work. 

While the company must continue employment until the pension kicks in, it doesn’t have to ensure that the employee stays at the exact same company. 

So, once they hit the mandatory retirement age, the employees may be transferred to a subsidiary or another company under the same group umbrella.

In April 2021, this law was revised to add that companies are required to make an effort to continue providing work opportunities for employees who are between the ages of 65 and 70. 

The government has called this new amendment the “Age 70 Retirement Law” or 70歳定年法（ななじゅっさい　ていねんほう）and, though not a hard rule, companies are expected to perform this “duty of effort” for employees who wish to continue working until the age of 70. 

As mentioned before, this is seen as an effort to raise the effective retirement age and also introduce continued employment or re-employment for the aging Japanese population. 

  

Finally, according to Article 11 of ASEEP, companies are also obligated to appoint a person to ensure the workplace is suitable for elderly workers. The company must also provide the facilities needed to ensure elderly employees can realistically continue working until they become eligible for pension.

Reemployment of Elderly Employees Until Pension

Another measure taken by ASEEP to ensure the job stability of older adults after the mandatory retirement age is for employees seeking less demanding roles or a change of employment. This is addressed in its third chapter titled “Facilitating the Re-Employment of Elderly Persons.”

According to Article 13 of the Act under this chapter, the law appoints the Public Employment Security Office to search for job openings for those who apply for re-employment after they’re past the mandatory retirement age at their companies. 

So, those who want to work in simpler jobs or can’t work in their current jobs can easily get reemployed with the help of the Public Employment Security Office.

What’s more, Article 15 of ASEEP also ensures that those who get dismissed due to mandatory retirement age are under legal protection. 

More specifically, the article stipulates that an employer who dismisses an employee due to the mandatory retirement age must look for reemployment opportunities and should facilitate appropriate measures to support the employee's re-employment.

The Average Retirement Age in Japan and Potential Changes in Government Policies

In a global sense, Japan is somewhat alone in its age-based policies when it comes to retirement. In fact, out of all the 38 OECD member states, Japan and South Korea are the only ones that still allow companies to set mandatory retirement ages.

According to the data obtained by the Ministry of Health, Labor and Welfare in 2022, 94% of the companies in Japan have a mandatory retirement age. Out of these, 70% force their employees out at age 60.

Due to this, the OECD has urged Japan to work on measures to end age-based discrimination and abolish the mandatory retirement age altogether.

Besides, with an aging population and a declining birthrate, Japan's workforce has been struggling. The Organization for  Economic Cooperation and Development (OECD) predicts that if Japan’s birthrate continues to stay at 1.3, the overall workforce population will decrease to 32 million people by 2100. This is almost half of the current population, which will have implications for the national pension system, so the government is expected to take measures to improve the workforce in the country.

For one, as the working population is getting smaller, the government is expected to increase the pension eligibility age from 65. If the country wants to combat the decline in the working population, however, it needs to do more.

In addition to raising the pension eligibility age, the OECD has advised the government to completely ban companies from setting a mandatory retirement age. That said, the topic still hasn’t been a priority of the government, as such a ban has yet to be discussed in parliament.

Japan Pension and Social Security Benefits

Under Japan's labor laws, pension insurance, known as nenkin, is available to all people working in Japan. Essentially, anyone who works in Japan is automatically included in the system.

This means that whether you’re an employee, have your own company, or work as a freelancer, you’re legally obligated to make regular payments for pension in some way.

Emphasis on the “in some way” part, as in some cases, you don’t actively have to do anything. For instance, as an employee of a corporation (or a Japanese sole proprietorship - "kojin jigyou" with over 5 employees), your pension payments are directly deducted from your monthly salary and paid by your employer.

This is called Kosei Nenkin, which means employer pension insurance, but if you don’t have an employer and work for yourself, you’ll have to handle the Nenkin payments yourself. I should also note that this also applies to employees who don’t qualify for a pension, such as part-time workers or those who work at a company with less than five people.

Once you pay for the premiums for at least ten years, you become eligible for a pension at age 65. However, employees need to work for at least 40 years to be eligible for a full pension payment.

If you’d like to learn more about pension benefits and what retirement is like in Japan, check out my post on retiring in Japan right after this.

Frequently Asked Questions About The Age of Retirement Age in Japan

Our guide should have all the answers you’re looking for, but not everyone has the time to read through it. 

So, as I conclude this post, let’s look at some of the most frequently asked questions about the retirement age in Japan, outlining the main points we’ve discussed.

What Is Japan’s Retirement Age for Software Developers?

Japanese law doesn’t set an age limit for how long an individual can work before they have to retire. Usually, companies have historically set mandatory retirement age clauses in contracts to refresh the workforce regularly. 

Regardless of the industry, it is required by law for companies in Japan to set the minimum retirement age at 60 years old. If the employee wishes to continue working, the company is required to employ them until 65. From the ages 65 to 70, the company is required to “make an effort” to provide employment opportunities, although the individual’s tasks and responsibilities may vary. 

Can Foreign Software Developers Work Beyond The Mandatory Retirement Age in Japan?

Yes, just like with any other industry, tech professionals can continue working past the mandatory retirement age set by their companies. Even if you retire at 60, you can get rehired in less demanding roles at the same company, or become a consultant for the company or a subsidiary company until 65. 

However, there is a possibility that the pay for these positions will be lowered, but if you are able to continue building on your skills, you might be able to negotiate with the company or find clients who are willing to pay your set price as a freelancer in the industry.

How Does The Japanese Pension System Work for Foreigners?

Pension benefits are available to foreign residents of Japan who have paid into the pension system for a minimum of ten years, beginning at age 65. 

Additionally, as I explained in my retirement in Japan post, if you’ve made pension payments elsewhere and the country has a pension agreement in Japan, you can also claim your pension from abroad in certain cases. 

How Might Changes in The Age of Retirement in Japan Affect The Future of Foreign Tech Workers?

The government of Japan may raise the legal retirement age in response to the country's aging population and declining labor force, which would give foreign workers more opportunities to continue their careers in Japan.

For now, it’s legally required for companies to set the minimum retirement age to 60 years old. That means a company can’t force an employee to retire before 60 if the employee wants to continue working. This minimum age requirement is unlikely to change and has not even been brought up for discussion within government meeting agendas.

But, as highlighted above, if an employee wishes to keep working after retirement, Japanese companies are currently required to provide job opportunities until the employee reaches 65. The company must then further do their best to make an effort to provide a job until the employee reaches 70 years old. 

While Japan has historically focused on young Japanese men as the main economic contributors, the government has been trying to create more opportunities and flexibility for foreigners, women, and elderly people to join and continue contributing to the workforce. 

Considering the recent talks about Japan raising the age at which an individual can become eligible for national pension, the OECD urging Japan to get rid of the mandatory retirement age altogether, coupled with the problem of Japan’s aging population, it’s highly likely that in the near future, you’ll be able to continue working at the same company until the age of 70 if you wanted to.