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International Relations

Japan's upper house approves social insurance agreement with China

Deal will relieve Japanese employees from double-paying pension contributions

People walk on the Bund in front of Shanghai's Pudong financial district. The new pension deal will reduce the annual financial burden on Japanese companies by some $484 million.   © AP

TOKYO -- The plenary session of Japan's upper house unanimously on Friday morning approved a bilateral social welfare agreement with China that will eliminate the requirement for their nationals to pay contributions into both countries' systems when they reside in each other's territory.

The two governments will work out details of the agreement, which will benefit Japanese companies that have operations in China, ahead of the targeted introduction in 2019.

China in 2011 started to require foreign residents to enroll in the country's pension system, which makes it necessary for Japanese corporate employees to participate in both countries' pension systems.

After the deal takes effect, Japanese corporate assignees residing in China will only need to pay into the Japanese pension system until their stay reaches five years. When they have stayed over five years, they will now be required to pay into the Chinese system, in principle.

According to the Japanese Foreign Ministry, the pact will have the effect of reducing the annual financial burden on Japanese companies, which cover the contributions, by about 55 billion yen ($484 million).

China already has similar deals in place with other foreign countries such as Germany, Canada and South Korea, putting Japanese companies at a competitive disadvantage. The Japanese business world has called for an early conclusion of the social security pact with China.

Japan and China launched negotiations on the social security pact in 2011, but the negotiations became deadlocked as bilateral ties deteriorated due to the dispute over the Senkaku Islands in the East China Sea, a group of small uninhabited islets that China calls the Diaoyu Islands.

The islands in question belong to Japan's Okinawa Prefecture.

Japanese Foreign Minister Taro Kono visited Beijing in January this year and reached a basic agreement with Chinese State Councilor and Foreign Minister Wang Yi on concluding the social security pact.

The Japanese and Chinese foreign ministers then signed the pact in Tokyo in May during a trilateral meeting of leaders from the two countries plus South Korea.

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