Editorial: Lifting the cap on pensioner income will benefit pensioners, companies

April 8 , 2026

Under Japan’s long-winded “earnings-tested old-age pension system,” if a person receiving a state pension has another income source whose combined monthly earnings exceed ¥510,000, then that person will see their pension payment reduced accordingly. For example, a pensioner collecting ¥100,000 a month who is also receiving ¥460,000 in other income puts them over the ¥510,000 cap and they will only be entitled to a pension cheque of ¥75,000.

However, the Ministry of Health, Labor and Welfare has recently revised that cap to ¥650,000, meaning an additional 200,000 people will be entitled to their full pension payments from April. Among the reasons cited for the ministry’s move is that the existing cap disincentivized people from working more hours: according to a fiscal 2023 government survey, more than 30% of respondents aged 65 and above said they preferred working less hours out of fear over the hit on their monthly entitlement.

Given the lengthening average life expectancy and years of post-retirement health, about half of those in their 60s say they hope to work after the age of 66.

The latest move is also seen to help companies that are facing a serious labor shortage. That older workers not only bring a wealth of experience but can help train younger workers as well, should prove equally helpful. It also allows more pensioners to help support national coffers through the taxes they pay on their supplemental income.

Komeito has actively lobbied for the change, submitting a proposal to the ministry in December 2024. The party believes the latest cap hike, which was partly driven by the rate change in nominal wages, should continue to be revised upward to reflect future increases in such wages.