Aging boomers may prove to be just as tight with savings

September 17th, 2013 by Philip Brasor & Masako Tsubuku

Praying is free (but the incense will cost you)

Praying is free (but the incense will cost you)

The media has been all over the new figures related to seniors that were released by the Ministry of Internal Affairs and Communications to coincide with Respect for the Aged Day. To recap, the number of Japanese people over 65 increased by 1.12 million from the previous year, which marks a 0.95 percent rise.

The big news is that this brings the total number of seniors to about 32 million, or one-fourth of the entire population. This was expected since the huge cohort of baby boomers — which in Japan refers only to people born during a brief period in the late 1940s — is now passing the 65-year mark, and the projection is that seniors will make up a third of the population by 2035. To break down these portions even further, 18 percent of the population is over 70, 12 percent over 75 and 7 percent over 80.

What hasn’t been discussed as widely is the economic ramifications of these developments. In 2012 there were 5.95 million people over 65 who were still in the work force, or 9.5 percent of all workers over the age of 15. The average amount of savings — whether bank accounts, annuities or securities — of households with more than one person where the householder is at least 65 is ¥22.57 million. The average savings of all households is ¥16.64 million. Also, 16 percent of over-65 households have savings of more than ¥40 million, while only 10 percent of all households have saved that much.

The hope has been that once they retire boomers will spend their savings more readily than did previous generations, but so far that doesn’t seem to be the case. The ministry’s statistics indicate that more money is being spent by seniors who are still working. Those who aren’t working, meaning they are on fixed incomes provided by government or company pensions, are spending much less.

In either case, working or not, the seniors are not touching their savings. They are only spending their income. In the parlance of economists, they are asset rich but cash poor. The average income of an over-65 household is ¥2.96 million (that of an average household in general is ¥5.8 million), but the median income of an over-65 household is ¥2.29 million, meaning the majority of these households are within the ¥1 to ¥3 million income range, and that’s what they are living on.

A Cabinet Office survey conducted in 2011 asked seniors what the purpose of their savings was. About 62 percent said it was for sudden illnesses and future care and 20 percent said it was for “maintaining existence” in case of an unexpected financial problem. Only 5 percent said they would spend it on leisure, and a mere 1.6 percent wanted to use it for travel. It should be noted that 90 percent of these respondents owned their own homes or did not pay rent, so housing, at least, was not a primary concern. However, given the cost of private nursing homes, which charge upwards of ¥20 million just to move in, it’s perfectly reasonable to think that seniors believe they have to save for those final years. Until that sort of anxiety is addressed, it will always be difficult to get seniors to part with their savings.

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3 Responses

  1. Plus the bulk of these savings are in gov’t bonds now, so to cash them out taxes have to be raised, or Kuroda at the BOJ has to print up the money.

    Japan’s postwar baby boom was actually short, BTW.

    Births 1920-1944 averaged 2.1M/yr. In the postwar disorder that fell to 1.8M 1945-46, but bounced up to 2.7M 1947-49.

    But births in the 1950s averaged 1.8M/yr, which meant the Japanese baby boom was nothing like the US’s, which had its peak birth year in 1957.

  2. But overall the portion of government bonds held by private individuals (kojin) is low, only about 5 percent. In the unlikely event that all those old folks cashed them in at the same time it wouldn’t have a huge effect on govt. finances. Banks and other institutions would just buy more. In any case, if they cashed them in and actually spent that money, the stimulating effect would be tremendous.

  3. But overall the portion of government bonds held by private individuals (kojin) is low, only about 5 percent

    ah, but so much is held indirectly, e.g. around 70% of Japan Post Bank’s assets are in JGBs . .¥171-6tr-trove-goes-abroad

    if they cashed them in and actually spent that money

    yes, the transition from the youth-oriented economy of the 1960s-80s to the senior-dominated economy of 2020- is going to be interesting and hard to see exactly how everything’s going to unfold from here & now.


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