Can foreigners get a pension in Japan?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 307.1 million views in recent years.

In the answers below I focused on the following topics and issues:

  • Can foreigners get a pension in Japan? Should expats living in any country put all their eggs in one countries basket?
  • Why is Tim Cook not as rich as Jeff Bezos?
  • What are ESG funds and why are they growing? Should these funds be part of your portfolio?
  • Will the US stock market keep going higher?
  • Is $4,000 a month enough to support a family of six in Cambodia, if they want kids to be educated privately at International schools?
  • What are some great examples of “durable competitive advantage” and why is this related to stocks?

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Can foreigners get a pension in Japan?

From what I understand, the Japanese pension system is compulsory for everybody living in Japan.

This includes for non-Japanese people. When you leave the country, there is a way to get some of it back.

However, the vast majority of long-term expats in Japan make private provisions.

The reasons are simple and rational:

1. Just like all other advanced countries, Japan has an ageing population. It is just a more serious problem in Japan.

Therefore, the Japanese government might renege on former promises, in much the same way the UK government did with women recently.

They are called the WASPI women

People living in Japan might be told that they can no longer claim until they are 70, or the benefits will be reduced.

2. Many foreigners in Japan aren’t familiar with the system and how the benefits work.

3. Often times, you can’t have as much flexibility with government and workplace pensions as private provisions, especially if you have an emergency.

So, the bottom line is, it doesn’t make sense to put your eggs into one basket – a Japanese local pension.

That applies all around the world, and applies for locals as well as expats.

The same is true for expats living in the UK, US or most other countries.

A Japanese expat living in the UK wouldn’t be wise to just focus on UK National Insurance and workplace pensions, especially if the stint is short-term, compared to diversifying holdings.

Why is Tim Cook not as rich as Jeff Bezos?

It is like comparing apples with oranges, and not apples with apples.

Which is an ironic expression considering Tim Cook has been the CEO of Apple since 2011!

Tim Cook didn’t create Apple. He is merely running Apple after being a lifetime corporate man.

Jeff Bezos, on the other hand, created Amazon. He used to have a bigger stake.

Now his stake is said to be 10.3%, as he diversifies his holdings outside of the one stock.

That is the biggest reason for his huge wealth. Amazon’s stock has skyrocketed in the last ten years:

That chart correlated with Bezos’ wealth growth:

If Cook would have created Apple, and his wealth was mainly linked to the one stock, he would also be very rich now.

Well he is rich given today’s news of his $750m stock payout.

He just isn’t close to being as wealthy as Bezos.

hat are ESG funds? Why investors are prefering ESG funds these days? How big are ESG funds?

“Blackrock’s former sustainable investing chief now thinks ESG is a ‘dangerous placebo” as reported by CNBC and the Financial Times.

There are two sides to this argument:

1. ESG investing, which is the focus on evaluating the environmental, social, and Corporate Governance of a firm to answer your question, is here to stay.

Younger people, in particular, care a lot about this.

What is more, they will soon get the biggest inherited wealth ever seen in the history of the word.

In the same way that most people investing in technology shares aren’t tech geeks, many older people will also join the trend.

We can see the recent growth here:

And the performance here:

ESG has beaten the S&P500 index in recent years.

2. This is a fad. Or even a “con”. Not in the literally sense of the word.

They aren’t fraudulent investments of course, but merely it is hard to determine how environmentally sustainable a firm is.

I personally think it is here to stay, and is a major trend, BUT you shouldn’t put all your eggs in this basket.

The trend does have numerous risks, including political ones.

Trends like electric vehicles and clean energy ETFs are highly dependent on government policies being friendly to the environment.

Due to the election cycle, policies can easily change.

Why do you think the U.S. stock market will continue to go higher?

Below is a brief history of the Dow Jones:

It hasn’t been updated to include the recent moves to 35,000. The market has gone from 30–40 in 1896, when it started, to 35,000 today.

I could have also used the S&P500, Nasdaq or MSCI World as examples.

The returns have been so good, when compounded, that the early decades look insignificant on the chart above.

Even the huge rises of the 1920s, and massive falls from 1929 until 1933, look tiny on the chart.

I have no doubt that in another hundred years, 35,000 will look small on any long-term chart.

The reasons are simple:

  • Compounding really adds up
  • Markets do come back from falls
  • Innovation doesn’t stand still. The Model T was innovation a hundred or so years ago. Computers were innovative in the 1980s. Now the new technologies are innovative. The world doesn’t stand still.
  • The stock market is just the top stocks. Individual stocks fall all the time. The entire stock market has a social darwinism to it. The weak get knocked off the index in favour of the strong. Netflix didn’t even exist twenty years ago. Now they are on the major indexes.
  • Regardless of capital values, you also have dividends.

What I don’t know is if stock markets will go down this year, or in the next few years.

Nobody knows how to time the market. At least, I haven’t met such a person yet.

However, historically speaking you have a 72%-74% chance of being up over a 12-month period:

When interest rates are low, that 74% goes up much higher, for obvious reasons – people don’t know what to do with their surplus money.

What is more, if you are down, you can just wait a few years and keep investing at lower valuations.

In comparison, I have a 100% chance of losing to inflation if I keep money in the bank.

Is 4,000 USD enough to support a family of 6 in Cambodia?

This is Northbridge school in Phnom Penh. One of the better international schools.

The fees are better $6,000-$23,000 a year. Most expats prefer to send the kids to international schools, especially in countries where the local schools are poor.

If the $4,000 includes allowances to cover the school fees, then it will be fine. $4,000 will also be fine if you localise your lifestyle.

Even when I briefly lived in South East Asia in 2013–2014, $4,000 a month wasn’t enough to send your kids to decent schools.

Inflation has probably occurred. This is one of the biggest issues expats face overseas.

Life is cheap if you are young and single, or have a spouse. Life becomes expensive if you want:

  • International quality healthcare and education
  • Other services you have became used to at home
  • To buy electronics if your laptop or phone breaks

So, you can “support” them on 4k. I doubt you can support them well though unless it includes allowances.

The same applies to Thailand and Malaysia, even though Malaysia is much cheaper for International schools.

That is one of the biggest reasons expat parents like Kuala Lumpur.

What are some of the best examples of “competitive advantage”?

Here are some good questions to ask:

  1. If some idiot with $1billion, say a second-generation rich guy, came along, would that kill the firm?
  2. If a very smart billionaire with $1billion came along, would that kill the firm?
  3. Would a firm like Amazon, which is in so many areas, be able to kill the company?

Let’s look at some examples of durable competitive advantage/

Wrigley’s. Even if you gave Bill Gates, Warren Buffett and Jeff Bezos $1billion each, it is unlikely they could outcompete in this niche.

People don’t feel like experimenting too much if a $0.50 piece of chewing gum, or however much it costs now!

Another example would be these two firms:

One of the UK’s richest men tried to compete – Sir Richard Branson.

Virgin Cola didn’t work:

Even Coca-Cola tried to compete against the original and “New Coke” was a disaster.

They needed to apologize and bring back the original. The brand has been around for so long, it is a relatively cheap product and has huge brand recognition.

They might not make as much as Amazon, but Coca-Cola is probably more famous from a brand recognition standpoint.

Unlike the technology industry where it is always changing, firms like Coca-Cola and Pepsi merely need to adapt to market changes, by offering new flavors and healthy options.

They don’t need to mess with the original. Many huge firms need to adapt to survive.

Coca-Cola, Pepsi, and Wrigley’s need to adapt their product lines, by enhancing them, to grow more quickly.

However, if they fail to adapt and just keep to the original products, they won’t go out of business, unless there are numerous black swan events.

Other examples would be:

  • Firms that have government support
  • The airline makers. There is a duopoly that is hard to break up with Airbus and Boeing. That might not last forever though
  • Anybody with a personal brand. You can’t outcompete Steven Spielberg with money unless he messes up. Even somebody much smaller than him has a competitive advantage. That small coffee shop that is huge on social media, and has a very loyal local following, can’t easily be dislodged by a firm like Starbucks.
  • Gillette and the shavers.
  • Some financial institutions. People don’t like changing their bank accounts, and some very high trust services, too often. Even if many of us open accounts like Revolut, often we still have a bank account from the time our parents opened up a junior account for us. Even though my main account has changed, I still have a bank account from when I was 12!
  • Some firms with a lot of residential income, like insurance firms that have renewals – assuming they have been around for a while. A firm that doesn’t need new clients to survive has a better chance than those always in need of fresh ones.

This is one reason why it is important to be diversified in investing. The fastest-growing stocks usually don’t have a durable competitive advantage.

In comparison, some of the firms which are growing slowly will still be here in a hundred years.

New consumer preferences and tastes, and for that matter competition, is unlikely to “kill” firms like that.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 307.1 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the article below, taken directly from my online Quora answers, I spoke about the following issues and subjects:

  • What are average investors supposed to do when the market crashes, as it inevitably will, other than ride it out until the crisis passes?
  • Is having a rising population beneficial for a country or a bad thing? 
  • Can foreigners, including non-residents, open up bank accounts in Cambodia? Is it even a good idea, despite the high USD interest rates on offer? 
  • Why does “everybody” seem to want to become a millionaire or billionaire these days? Or, is it even true?

To read more click on the link below

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