Boomer boom: Businesses tapping consumption where they can find it
In July, the Bank of Japan released the results of its quarterly tankan survey of business sentiment for April-June. The most notable, and hardly surprising, result was the drop in confidence among major manufacturers. Less was said about the fact that domestic demand and individual consumption appear to be stabilizing. The numbers get even more encouraging when you look at specific industries.
In the tankan, an index of “0” means no change in sentiment, with minus numbers indicating a loss of confidence and positive numbers a gain in confidence. The index for hotels and restaurants was +3, the first positive rise in five years, and a substantial one. Even more impressive was the index for “individual services,” such as travel agents, a category launched in 2004. The most recent tankan showed an index of +25. These numbers are at once heartening and baffling. Average income did not rise during the same period, which means consumption shouldn’t have risen, so why the increase in confidence?
The report’s authors credit these hopeful signs to people over 60, and smaller businesses’ resourcefulness in tapping this demographic. A recent article in Tokyo Shimbun profiled an izakaya (drinking establishment) chain called Hokkaido, which has an outlet in Kokubunji, Tokyo, that offers a special hiru enkai (daytime party) plan: If each member of a party orders at least ¥3,500 in dishes, then the party can drink as much as they like without paying extra.
This plan was introduced two years ago and targeted young mothers whose only time to hang out together was usually in the daytime when their kids were at school. Discounting the disquieting notion of housewives returning home in the late afternoon drunk, the plan never really caught on with its target demographic, but it really took off with retired men in their 60s, who spend even more than Hokkaido expected from the young mothers. The number of customers opting for daytime parties at the Kokubunji outlet has increased 40 percent over the last year. In fact, more than ten percent of the chain’s “party plans” are for daytime use.
Japan Travel Bureau’s Grand Tour Service has reported a 20 percent increase over the last three years in booking for its higher-end tours, and almost all the customers are older. Central Sports, a nationwide health club chain, says that the average age of its membership is now over 50, with one-third being over 60. A company representative told Tokyo Shimbun that until five years ago their busiest time of day was after 6 pm, but now it’s the morning, when the retirees use the facilities.
Other figures show this trend is general. People over 60 are responsible for 44 percent of individual consumption right now, which is particularly important since no one expects consumption among the working population to increase any time soon. This year’s average summer bonus was less than it was last year, reversing a two-year slight upward trend. The income of the current work force is directly affected by economic conditions, but not so much the incomes of older people, who have savings and pensions. The core baby boomer generation, born between 1947 and 1949, is turning 65. That means they become eligible for their full pension, meaning both their kosei nenkin pension if they were salaried employees, and their kokumin nenkin (basic pension). That’s 6.7 million people.
Another major impact is the fact that many of these people continued to work after they retired, often at the same company (which no longer pays them benefits), thus giving them even more disposable income. If this were the U.S., one might also say they’d probably finished paying off their home loans, but most Japanese boomers didn’t take out theirs until their late 30s or early 40s, and since the standard mortgage is 35 years they’re probably still in debt. Let’s at least hope the kids are gone and they can enjoy those afternoons in Hokkaido, whether it be the drinking establishment or the prefecture.