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In this paper, we examine the amended Law for the Stabilization of Employment of Older Persons (LSEOP) that was enforced in 2006. The LSEOP requires enterprises to take one of three job security measures for their employees in line with the upward revision of the pensionable age: a) any increase in the mandatory retirement age that exceeds the current pensionable age; b) the introduction of continuing employment systems; or c) the complete abolition of mandatory retirement systems. Our results suggest that a wage reduction after the mandatory retirement age is a key determinant of continued employment in an enterprise. Because the LSEOP does not regulate wage reductions, the effect of the LSEOP is limited. However, our results also imply this would be appropriate for avoiding the distortion of labour demand, particularly the increase of young recruits.

Today Japan is far ahead of the rest of the world on the aging curve of the population and faces unprecedented pressure to delay workers’ retirement. In this national context, workers’ retirement decisions and behaviors are largely determined, at the macro- and mesolevels, by the interplay between the government and employers over reforming mandatory retirement corporate policies thoroughly and uniformly institutionalized across the country’s workplaces, which are set at ages much younger than in most other developed countries around the world. The primary microlevel determinants of retirement include the persistent gender roles, which have still affected many female workers, those currently aged 50 and older in particular, as they are often rendered as primary caregiver for children, aged parents, and the household.