Japan's pension and the lump-sum withdrawal: cash out or keep your years?

Most Americans pay into Japan's pension without thinking about it, then face one real decision on the way out: take a partial refund now, or keep those years toward a Japanese pension later.

The short version

• Everyone living in Japan from 20 to 59 is in the National Pension (kokumin nenkin); company employees are also in the Employees' Pension Insurance (kosei nenkin) through payroll [1][2].
• A Japanese old-age pension needs 10 years of coverage, but the US–Japan social security agreement, in force since October 1, 2005, lets you count US work credits toward that test [3][4].
• If you leave, the lump-sum withdrawal payment refunds part of your contributions, now counting up to 60 months (5 years). You must claim it within two years of leaving [5][1].
• Japan withholds 20.42% tax from the refund, which you can usually reclaim by filing a Japanese return through a tax agent [6].
• Take the lump sum and those years can no longer be totalized under the agreement [4].

USD conversions use the Federal Reserve H.10 rate of October 30, 2026 (USD 1 = JPY 157.47), rounded.

How Japan's pension works

Japan's system has two tiers [2]:

1. National Pension (kokumin nenkin). The basic layer for all residents of Japan aged 20 to 59 [2]. If you're self-employed, a freelancer, a student or otherwise not on a company plan, you pay it yourself every month [7]. In fiscal 2026 (April 2026 to March 2027) it's ¥17,920 a month (about USD 114), according to the Japan Pension Service [10]. If your income is low, you can apply for an exemption [7].
2. Employees' Pension Insurance (kosei nenkin). The second layer for company and public-sector workers. Contributions are a percentage of your standard monthly pay and bonuses, split evenly between you and your employer [7]. Being in this plan automatically puts you in the National Pension too [2].

Think of it like Social Security, where FICA comes out of your paycheck and your employer matches it, except Japan bills freelancers and students directly through the ward. You usually sign up for the National Pension at the ward office when you register your address and join National Health Insurance.

The US–Japan social security agreement

The United States and Japan signed a totalization agreement that took effect on October 1, 2005 [3]. It does two things.

No double social security tax

Normally you pay into the system where you work. But if a US employer sends you to Japan for five years or less, you can stay in US Social Security only and skip Japanese pension contributions [3][8]. Your employer has to request a certificate of coverage, and Japanese health insurance can be included in some cases if your family has private health coverage [8]. Self-employed Americans who move their business to Japan for five years or less can keep paying US self-employment tax instead [8].

Totalizing your years

Japan requires 10 years of coverage for an old-age pension [4]. Three Japanese years alone won't get you there, but under the agreement, Japanese and US periods can be added together to pass the test [4]. Japan then pays a pension based on your Japanese years. Periods when you were covered in both countries at once only count once [4].

It works the other way too. The Social Security Administration counts Japanese credits toward a US benefit only if you already have at least six US credits, and doesn't use them if you already qualify on US work alone [8]. Heads-up: the SSA's Japan agreement page still says Japan needs 25 years of coverage. That's out of date; the Japan Pension Service says 10 [4][8].

The lump-sum withdrawal payment

If you aren't a Japanese citizen and you leave Japan before qualifying for a pension, you can claim a dattai ichijikin, or lump-sum withdrawal payment [1][5]. You must [5]:

• not hold Japanese nationality
• be out of the Japanese pension system and no longer have an address in Japan
• have at least 6 months of contributions
• not meet the 10-year qualifying period, and never have had a right to a disability pension
• claim within two years of leaving Japan [1]

Now up to five years

The cap rose from 36 to 60 months from April 2021 [5]. When we checked the Japan Pension Service page in November 2026, 60 months was still the maximum [5]. Rules can change, so check that page again before you file.

How much you get

For the National Pension, the amount depends on your months paid and the premium in the year of your last payment. For a last payment between April 2026 and March 2027 [5]:

For the Employees' Pension, the formula is your average standard monthly pay times a payout rate that rises with months covered, from 0.5 at 6 months to 5.5 at 60 months or more [5]. As an illustration, if your average standard pay was ¥300,000 and you worked five years, that's ¥1.65 million (about USD 10,480) before tax.

How to claim

1. Before you leave, file a moving-out notification at your ward and turn in your residence card at the airport.
2. Appoint a tax agent in Japan if you want the 20.42% back (more below).
3. After you've left, send the claim form from the Japan Pension Service website, available in several languages, with the supporting documents the form lists [1].
4. Watch for the notice of payment. You'll need it for the tax refund [6].

The 20.42% tax, and getting it back

Japan withholds income tax of 20.42%, including the reconstruction surtax, from the lump sum [6]. On the ¥537,600 National Pension maximum, that's about ¥109,800 (about USD 700).

You can usually reclaim it by filing a Japanese tax return under Article 171 of the Income Tax Act, through your tax agent in Japan, with the "Notice of the Lump-sum Withdrawal Payment (Entitlement)" attached [6]. Because you're no longer in Japan, you need that agent, often a friend, former coworker or a professional, appointed before you go. The refund comes on top of the lump sum, so on a five-year Employees' Pension claim it can be real money.

Cash out, or keep the years?

This is the big call. The Japan Pension Service warns that once you take the lump sum, the Japanese periods used to calculate it can no longer be totalized under a social security agreement [4]. You trade a future pension for cash now.

There's no one-size answer. Request your record from the Japan Pension Service and your Social Security statement from the SSA before deciding.

The US tax view

Uncle Sam still wants his return while you're in Japan. Two points matter here:

• Japanese pension contributions don't get you a US tax credit. IRS Publication 514 (2025) says no deduction or credit is allowed for social security taxes paid to a country that has a social security agreement with the US [9]. Japan is one.
• The lump sum itself. How the IRS treats a Japanese pension refund depends on your facts, including how much of it is a return of your own already-taxed contributions and how the US–Japan tax treaty's pension rules apply. A US expat tax preparer can check your situation.

Swapping notes on the tax-agent step is a good thing to do in our community group for Americans in Japan.

Sources

1. Japan Pension Service: Lump-sum withdrawal payments (English)
2. Japan Pension Service: National Pension (English)
3. Social Security Administration: US international social security agreements
4. Japan Pension Service: Special provisions concerning Japanese pension payments under agreements
5. Japan Pension Service: Lump-sum withdrawal payment, requirements and amounts (Japanese)
6. National Tax Agency: Income tax on lump-sum withdrawal payments (No. 12005)
7. Japan Pension Service: Pay contributions (English)
8. Social Security Administration: US–Japan social security agreement
9. IRS Publication 514 (2025), Foreign Tax Credit for Individuals
10. Japan Pension Service: National Pension premium, fiscal 2026 (Japanese)

Keep reading

• Japanese taxes for Americans: how they fit with your US return
• National Health Insurance in Japan
• Tax treaties and totalization agreements
• Social Security abroad: payments and restrictions