The health of Japanese pension plans improved considerably over the last year, as the country's domestic equity markets and overall economy have picked up, according to a new report from Greenwich Associates. Overall, the average Japanese pension plan was 96% funded this year, compared with 62% in 2003. Funded levels in Japan are better than those of U.S. and European pension plans, according to the report, which presented the results of a survey of 352 Japanese pension funds conducted between March and May.
The improved funded status has been driven by robust investment performance, while a stronger economy has also given corporations more "breathing room" to make contributions to their pension plans, Dev Clifford, consultant at Greenwich, said in an interview. He said these "rising tides" have prompted a more optimistic outlook for Japanese pension plans. While the portion of frozen pension plans increased slightly to 13%, from 12% the year before, far fewer plan sponsors indicated that they intend to close their pension plans to new employees. In 2006, only 3% of pension plan executives said that they expect to freeze their pension plans to new entrants over the next three years, compared with 11% in 2005.