, Editorial Director
The tall buildings of Tokyo look, in general, much like the skyscrapers in other major cities of the world; and yet, there is something different about them.
Likewise, the tall buildings in London look different from those in Tokyo or New York.
Defined contribution plans are springing up in many countries, and as each country seems to put its own stamp on architecture, so each will shape defined contribution plans to its own cultural traditions and needs.
By this time next year, the Japanese government might well have passed legislation making defined contribution plans possible. Now there is no law preventing them, but defined contribution plans get no favorable tax treatment.
The final shape of the law authorizing defined contribution plans is uncertain, but one thing is clear: defined contribution plans in Japan will be different from the American model, or the British model, or the Australian model.
In fact, the Japanese model probably will end up borrowing various features from many of the existing systems, and then assembling the parts into a uniquely Japanese design.
One prediction: There will be little employee choice to begin with. At best, some companies might offer a limited choice of lifecycle-type funds.
Probably because of this desire to design an effective defined contribution system, Japanese corporate executives and government officials are eager to learn all they can about other systems.
In May, 220 Japanese executives attended a two-day pension fund symposium that was organized by Pensions & Investments, and at which defined contribution plans were a major topic.
The sessions started at 9 a.m. each day. The first day of the conference was finished at 6: 50 p.m., and the second day ended at 6: 15 p.m.
Such was the intense interest level of the executives that on both days, not only did most of the attendees remain until the end of the last session, but they remained afterward to share insights with their colleagues and ask questions of the speakers.
At most conferences in the U.S., a speaker scheduled to start at 4 p.m. on the final day is speaking to a virtually empty auditorium, unless he is Alan Greenspan.
Many financial services providers from the U.S. have recognized that Japan eventually will adopt some form of defined contribution pension system.
Some are still hoping to nudge the Japanese system into a shape similar to the U.S. system.
That's probably a forlorn hope. They would be better advised to be prepared to reshape their investment vehicles to meet the needs of a uniquely Japanese model when it appears.
Those who adapt most quickly to the emerging Japanese defined contribution system will prosper.