Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



Much prior literature on asset patterns among the elderly has mostly overlooked housing wealth as a determinant of retiree wealth, particularly in the Japanese context. Yet releasing equity in housing may be a natural mechanism to boost consumption, reduce public pension liability, and mitigate the demand for long-term care facilities in Japan. Our study evaluates what might be needed to implement reverse mortgages (RMs) in this country. Policies could include exempting RMs from capital gains tax and transactions tax, along with mechanisms to make annuity income flows nontaxable, along with interest rate accruals for RMs. In addition, housing market reforms to enhance information flows would be needed, particularly regarding new and existing housing trades, which could permit the securitization of housing loans and lines of credit. Other improvements in capital markets could also help, including the establishment of reinsurance mechanisms to help lenders offer these reverse mortgages while having some protection against crossover risk. In the Japanese case, demand for RMs will be dampened by declining residential housing values as well as low interest rates and long life expectancies. Nevertheless, we conclude that RMs can be a good way to finance elderly consumption in Japan, particularly against the backdrop of governmental financial stringencies

Working Paper Number


Copyright/Permission Statement

©2003 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved


Funding for this research was provided by the Economic and Social Research Institute, Cabinet Level, Government of Japan, and the Australian Research Council. Without implicating them, we acknowledge helpful assistance and suggestions from Yasuhiro Asami, Hitoshi Asaoka, Chris Bidner, Barry Bosworth, Marianne Comparet, Adam Creighton, Rebecca Edwards, Loftin Graham, Koichi Hamada, Cullen Hayashida, Hiroko Kase, Hideaki Kitaki, Yukinobu Kitamura, Chris Lewis, Chris Mayer, Warwick McKibbon, Yuhi Mori, Hodaka Morita, Kiyohiko Nishimura, Hisashi Ohgaki, David Rasmussen, Junichi Sakamoto, Miki Seko, Edward Szymanoski, Laura Vecvagare, Masaharu Usuki, Paul Wallace, and participants at the September ESRI meetings in Washington DC. The authors retain full responsibility for all views contained herein

Included in

Economics Commons



Date Posted: 04 September 2019