Translation of a paper originally published in an academic journal of Yokohama National University “Yokohama Management Research” vol. 38, March 2018.

Prof. Osamu Yamaguchi presented a nine-chapter odyssey of Japan’s corporate pension scheme, covering from primitive plans in the early days to issues to be fixed in the future. Investment Japan will be introducing each chapter over the next several months.

Past, Present and Future Perspective of Japan's Corporate Pension Scheme

Osamu Yamaguchi
Emeritus Professor of Yokohama National University


Chapter 1.
Pension-like plans in the age of feudalism (the Edo Period)


In the Edo Period, many feudal domains monopolized production and sale of goods for the purpose of the commercial profit to promote domestic products and reinforce their financial status.They played a similar role of today's enterprises, focusing on development of economic activity.Merchants and mine refiners with many employees also engaged business activity like today's enterprises.

In addition, pension-like plans existed in some domains, such as Aizu and Kaga, although they were quite different from today's corporate pension plans.They provided awards to elderly people as one of good policies by the feudal domain to give ration endowment rice every year.They were from the moral aspect of Confucianism that supported the feudal system.Also, permitting franchise in the merchant class was alike the retirement bonus (lump-sum) system introduced in the modern times.

1.1  Endowment rice system for elderly people in the Aizu domain

Masayuki Hoshina, who was born as a non-legitimate child to Hidetada Tokugawa (the 2nd Shogun of the Tokugawa government), became the daimyo (Japanese feudal load) of Aizu domain introduced the endowment rice system for senior people of 90-year-old and over who lived in the domain.

He was extremely trusted by the 3rd Shogun, Iemitsu Tokugawa (his elder brother), and was appointed as God Father of Ietsuna who was the successor child of Shogun position at the coming of age ceremony (15 years old).His responsibility was increased at the death of Iemitsu.To assist the young 4th Shogun, Ietsuna, he governed the distant Aizu domain, residing in Edo over 23 years long.

In July 1663, he issued 'notices for governmental affair execution orders' from Edo to Aizu to provide 5 'gou' (about 750g) of rice per day to people aged 90 and over for the rest of their lives regardless of their status.The notice was immediately taken into effect to provide the food to total of 151 people (4 samurai retainers, 7 town residents and 140 village people) ¹.This could be called a kind of pension scheme in the rice standard system period.

1.2  Endowment rice system for elderly people in the Kaga domain

Tsunanori Maeda became the 4th daimyo of the Kaga domain at the only 3 years old by a sudden death of his father Mitsutaka.He was under the wardship of his grandfather Toshitsune, and after the death of the grandfather, he was strongly influenced by his father-in-law Masayuki Hoshina to reform the domain government.In 1670, he introduced the endowment rice system in the Kaga domain to give annual award of one-person food (5 'gou' for men, 3 'gou' for women) for senior people aged 90 and over regardless of sex and status ².This was a copy of Masayuki Hoshina's policy.

Same kind of endowment rice system for elderly people could be seen in the Odawara domain as well.Later in the Edo Period, more domains such as Yonezawa, Moriyama and Shibata institutionalize the endowment rice system ³.

1.3  Goodwill system in merchant families

Merchant's goodwill system in the Edo Period was originally to give a permission to establish a franchise branch.When an employee, who had become a senior manager ('Banto' and above) after many years of working, resigned after obligatory work period, his employer gave him a goodwill as another merchant in the same name or provided money to establish independent merchant.

Professor Yasushi Nishizaka of Senshu University studied the goodwill system of Mitsui Echigoya store in detail.According to his report, employees were classified as 2 kinds; employees working in the backyard and at the front yard, and the system was applied only to the front yard workers.Employees working in the front yard joined the store at about 12-13 years old as an apprentice and were promoted via a severe selection process thereafter to gain benefit in their 30's and over.The benefit was to give retirement allowance as capital silver (money) to start business.Nishizaka's book showed examples of the capital silvers based on a promotion model ⁴.

The examples of the capital silvers under Mitsui Echigoya's promotion model were: about 100 'ryo', as the equivalent value of gold price, for the first year of the head of managers at 30 years old after 18 years of employment; about 200 'ryo' for the first year of the head of general managers at 33 years old after 21 years of employment.

At that time, the theft of 10 'ryo' deserved death penalty ⁵, so the level of 100 'ryo' or 200 'ryo' of the capital silver was a huge amount.The equivalent value today's is difficult to measure, but assuming from the price of a bowl of soba (Japanese noodle), value of 1 'ryo' is approximately 120,000-130,000 yen.So, 100 'ryo' would be around 12,000,000-13,000,000 yen and 200 'ryo' is double of that.

Such goodwill system was widely practiced, but the qualified requirement etc. was quite different depending on stores.For example, Shirakiya cloth store provided the goodwill and the certification stamp of the store at the retirement of a head of branch managers with 30 years of employment and over.However, retirees of minor positions received retirement allowance according to years of employment and gratuity for retirement ⁶.

1 Nakamura, Akihiko (1995), "Masayuki Hoshina", pp 124-129: Chuko Shinsho 1227.Aizu Historical Academy(1994), "Aizu Chronology", p 129: Rekishi Shunju Shuppan.The original document is the 2nd volume of "Aizu-han Kasei Jikki (historical family authentic record)".
2 Wakabayashi, Kisaburo (1961), "Tsunanori Maeda", p 91: Yoshikawa Koubunkan.
3 Yanagitani, Keiko (2011), "Aging and Caregiving in the Edo Period", pp 78-79: Yamakawa Shuppansha.
4 Nishizaka, Yasushi (2006), "Study of Mitsui Echigoya Employees", pp 148-159: University of Tokyo Press.
5 In the Edo Period, the punishment for thief was very severe and the stolen 10 Ryo was deserved by death penalty (cut-off of head) according to "Kuji-kata Osadame-gaki (Public affair written rules)".
6 Aburai, Hiroko (2007), "Edo Hokonin no Kokoroe-cho (Employees' Manners in Edo Period)", pp 49-53: Shincho Shinsho.


( to Chapter 2: )


Translator of this series:

Tomoyuki Kubo

President of Kubo Research Institute Co., Ltd.
Teaching Professor of Nihon University (Pension system, Faculty of Economics)
Fellow of the Japanese Society of Certified Pension Actuaries (JSCPA)