Why pension tsunami is not over for Japanese companies
By James DornanSeptember 28, 2018 11:06:17Japanese companies will likely face a tsunami of pension debt as pension funds around the world face an unprecedented flood of retirements amid the global economic meltdown.
Japan has the world’s largest retirement savings fund and has been grappling with an unprecedented wave of pension liabilities from firms that have defaulted on their obligations.
Japanese pension funds in particular are facing a wave of retiree debt that could wipe out about $40 billion of their assets, a financial analysis firm found.
The firm’s analysis, based on data from 10 pension funds and a survey of investors, projects that the total pension liability for Japanese pension funds could hit about $20 billion.
The firms have been forced to refinance or sell their pension obligations.
The wave of defaults from pension funds comes as the U.S. and other major economies struggle with a global recession that is likely to remain as deep as a global financial crisis.
With the global economy in a deep recession, the pension liability of U.N. nations, including Japan, has grown significantly, according to the Tokyo-based consulting firm SBI Capital Markets.
The global pension system is at risk of a massive tsunami of retirement debt as global firms, including pension funds, are forced to make changes and refinance, according an analysis of data by SBI and the Financial Times.
It is expected to cost the world around $10 trillion in the next 10 years to replace retirees, said Yukio Saito, senior managing director of the pension fund at Mitsubishi UFJ Asset Management in Tokyo.
The total liabilities of all of the U, S, M and A major pension funds combined will reach $40 trillion, according the SBI analysis.
The amount of pension-related debt is expected rise from $3.5 trillion today to $8 trillion by 2025, he said.
The pension liability is not just a concern for pension funds.
Japan’s government, which manages the pensions of about 200,000 retired workers, has been unable to keep pace with the number of retirees who have retired, forcing it to make massive restructuring plans and renegotiate pensions for its members.
The crisis is already having a financial impact on Japanese companies.
A number of Japanese companies have already filed for bankruptcy.
The number of bankruptcies in Japan has surged from less than 500 in 2011 to nearly 2,000 in September 2018, according a Bloomberg survey.