A New Anatomy of the Retirement Process in Japan

In Japan, retirement is a gradual process that transpires over a particularly long period of time. Using large scale micro-level datasets from the Survey of Employment of the Elderly compiled by the Japanese government, we provide some stylized facts on the development of retirement behavior since the 1980s and explore factors affecting the individual retirement decision. First, we observed a general declining trend in the proportion of retired individuals aged 55-59 (especially females) while the proportion of retired individuals aged 65-69 (especially males) increased. Second, the survival analysis on actual retirement age shows that males who worked as an expert/technician or manager before retirement or individuals receiving a larger public pension income are likely to retire earlier. Third, another survival analysis on expected retirement age shows that workers with lower job satisfaction in terms of rewards and males with a larger family size are more likely to retire earlier.retirement, labor supply of the elderly, survival analysis, Japan

Social Security Earnings Test and the Labor Supply of the Elderly: New Evidence from Unique Survey Responses in Japan

Although there exists a large volume of literature on the subject, a consensus on the labor supply effects of the social security earnings test for the elderly has yet to be reached. This study proposes an alternative approach of utilizing direct responses to a survey on the earnings test, a unique feature of our dataset compiled by the Japanese Government, to provide new evidence on the sensitivity of the labor supply decision of workers aged between 60 and 64 with respect to the earnings test. Our empirical results show that a large proportion of these workers are discouraged from working or reduce their working hours, even after correcting for observed attributes of individuals who reported either affected or unaffected. In addition, the revision of the test rules in 1995 did not alter the labor supply of the elderly.social security earnings test, labor supply of the elderly, Japan, wage distribution, DiNardo-Fortin-Lemieux decomposition

The Determinants of Exit from Nursing Homes and the Price Elasticity of Nursing Home Care: Evidence from Japanese Micro-level Data

This study examines how the price mechanism affects the length of residents' nursing home stay and their destination after exit. The purpose of this analysis is to evaluate policy options to reduce the number of socially institutionalized elderly nursing home residents in Japan. To address these issues, we take advantage of micro-level data from The Survey on Care Service Providers compiled by the Japanese government. Our duration estimates show that the price elasticity of the hazard of exit from welfare care facilities was 1.7 (95% CI: 0.4-3.0) and 1.8 (95% CI: 0.0-3.8) from health care facilities. The probit estimates show that a 1 percentage point increase in copayments leads to an increase in the probability of returning home by 0.04% for patients of welfare care facilities and 3.7% for those of health care facilities. In contrast, the price elasticity of the probability of being re-hospitalized is -3.3% for patients of health care facilities and -1.9% for those of medical care facilities. An appropriate price policy may work well to shorten patients' length of stay and to reduce the number of the socially institutionalized. Since the effects of the introduction of a price mechanism may differ for different types of facilities, public policies aimed at broadening residents' range of choices need to be designed with care and incorporate an appropriate risk adjustment system to provide a safety net for those elderly highly at risk of being socially institutionalized.

Employment Policy and Corporate Governance: An Empirical Comparison of the Stakeholder versus the Profit-Maximization model

Japan's economic problems over the past decade and a half have triggered far reaching changes in the country's corporate governance system and there have been significant changes in both companies' ownership structures and composition of board members. This paper examines how board and ownership structures affect firms' decision as to how to reduce labor costs when firms face excess employment. Our findings confirm that outside directors are more inclined to implement layoffs and voluntary or early retirement, while insiders are more likely to decrease new hiring and protect incumbent employees. These findings are consistent with the stakeholder view of the firm rather than the neoclassical view of firms as profit-maximizers.corporate governance, employment downsizing, multivariate probit model

The Labor Supply Effect of Social Security Earnings Test Revisited: New Evidence from its Elimination and Revival in Japan

Evidence on the effect of the social security earnings test on the labor supply of the elderly continues to be mixed. We utilize micro-level data compiled by the Japanese government in order to examine the labor supply effect for those aged 65-69 before and after two major reforms of the social security earnings test in Japan: its elimination in 1985 and its revival in 2002. We provide little evidence that the changes in the earnings test affected the wage distribution of the elderly after controlling for changes in the attributes of workers and firms.At the same time, the direct survey responses to the effect of the revival in 2002 reveals a large effect on the labor supply of the elderly. These empirical findings indicate the risk that a traditional bunch analysis underestimates the labor supply effect when it is obscured by measurement errors or labor market rigidities.social security earnings test, labor supply of the elderly, Japan, wage distribution, DiNardo-Fortin-Lemieux decomposition

Has Japan's Long-term employment Practice Survived? New Evidence Emerging Since the 1990s

What happened to the traditional, long-term employment practices in Japan after the 1990s has remained unexplored. We take advantage of a micro data set from the Basic Survey on Wage Structure to provide new evidence regarding the years of tenure for Japanese male workers after a decade-long recession. While the practice of long-term employment is still alive among the workers who are already in the system, the proportion of workers who are not covered by the system has increased. These ongoing phenomena contribute to the bipolarization in the Japanese labor market.long-term employment practice, Japan, Oaxaca-Blinder decomposition, DiNardo-Fortin-Lemieux decomposition

"Are People Insured Against Natural Disasters? Evidence from the Great Hanshin-Awaji (Kobe) Earthquake in 1995"

We investigate whether people were insured against unexpected losses caused by the Great Hanshin-Awaji (Kobe) earthquake in 1995. The unique household data employed led to several empirical findings under a natural-experimental situation. The complete consumption insurance hypothesis is rejected overwhelmingly, suggesting the ineffectiveness of the formal and/or informal insurance mechanisms against the earthquake. We also investigate possible factors that inhibit full risk-sharing. Transfers may be particularly ineffective as insurance against losses for co-resident households. Households borrow extensively against housing damages, whereas dissavings are utilized for smaller asset damages, implying a hierarchy of risk-coping measures, from dissaving to borrowing.

The Effectiveness of Bank Recapitalization in Japan

This study examines the effectiveness of bank recapitalization policies in Japan. Based on a careful reading of the "business revitalization plan" submitted by banks requesting government funds, we identify four primary goals of the capital injection plan in Japan: 1) to increase the bank capital ratios 2) to increase lending, in particular to small and medium enterprises, and avoid a "credit crunch" 3) to increase write-offs of non-performing loans and 4) to encourage restructuring. Using a panel of individual bank data, we empirically estimate the effectiveness of the Japanese government policy of public fund injection in achieving the first three of these stated goals. Our empirical analysis of international and domestic banks reveals that the capital injections going to the larger international banks were more effective than those used toward regional banks in Japan. The first capital injection in 1997 was effective primarily in helping international banks to clear the 8% capital adequacy ratio (BIS ratio) required under the Basel Accord. The second round capital injections seem to have been even more effective, boosting capital adequacy ratios for the regional as well as international banks, and encouraging other policy objectives such as increased lending to small and medium enterprises.

Price Expectations and Consumption under Deflation: Evidence from Japanese Household Survey Data

The Japanese economy has experienced price deflation since the mid-1990s. Despite the importance of overcoming deflation, there has been little recent research on price expectations in Japan. This paper takes advantage of an original and rich quarterly household-level data set from the gKokumin Seikatsu Monitorsh to estimate average price expectations, examine the factors that affect price expectations, and examine how changes in price expectations have affected household consumption. Our estimates indicate that average price expectations ranged from minus 0.2 to zero percent in 2001 and 2002. However, there was an increase to 1 percent in the first quarter of 2003, followed by a decline to 0.2 percent in the second quarter, and a steady increase toward 0.8 percent by the first quarter of 2004. Price expectations depend on current price movements and lagged expectations. A series of quantitative easing monetary policies were not very effective in changing the price expectations, since the policy announcements caused revision of price expectations only for a small portion, i.e., 5-10% of people surveyed. The jump observed in the first quarter of 2003 was a reaction to the outbreak of the Iraq war. Our study also confirms that deflationary expectations discourage household consumption, mainly durable consumption, by delaying the timing of purchases, suggesting that the deflationary expectations should be upwardly revised to restore a vital Japanese economy.

Did lower interest rates reduce Japan's household savings rate since the 1990s? Evidence based on the maturation of postal savings certificates

Japan's traditionally high household saving rate has declined substantially since the early 1990s. While this decline is often explained as a result of the rapid increase in the population share of the elderly who are dissaving, we argue that the cause is a decline in interest income triggered by falling interest rates. To examine our hypothesis, we focus on the effect of the maturation of relatively high-yielding postal savings certificates. Estimating a savings function, we find that the reduction in interest income caused by the maturation of the postal saving certificates reduced household saving rates by more than 3 percentage points.household savings rate