Baby boomers' consumption could be driving force for economy
Consumption by elderly people has been picking up recently.
We hope their purchasing power will give the nation's economy a shot in the arm.
Annual consumption by elderly people--mainly those aged 60 and older, including postwar baby boomers--topped 100 trillion yen for the first time in 2011. It accounted for 40 percent of domestic consumption.
Monthly consumption expenditure per household whose head is aged 65 to 69 has been on an upward trend. The growth rate of expenditure for this age group is above the average for all demographics.
After retiring, elderly people tend to withdraw savings they squirreled away while they were working to spend on products they need or want. In economics, this is known as the "life-cycle hypothesis" (LCH).
In addition to this special characteristic, many baby boomers, who are happy to spend their money and have led their generation, started turning 65 this year. The baby boomers have apparently been adding momentum to unconventional patterns of consumption.
Elderly population growing
The proportion of people 65 and older has reached 24 percent of the population. This figure is expected to top 30 percent in 2030. It is important to maintain the consumption trend of senior citizens as an engine supporting the economy.
Already business activities targeting seniors with time and money on their hands, such as supermarkets that open early in the morning and around-the-world cruises, have become popular.
However, many companies seem unable to shake off their traditional mindsets. Today's senior citizens are not all modest old folks. They are very active and quite a few are willing to splash out for things they feel are significant, even if they usually closely watch their pennies in everyday life.
It is not only consumption of tangible objects that is thriving, but also courses at culture schools and music schools, such as piano lessons. This suggests elderly people value spending time or having experiences that provide psychological satisfaction.
They are enthusiastic about staying healthy and favor items that help slow the aging process, which has been a boon for sports clubs and cosmetics that keep them looking younger.
Think outside the box
Potential money-spinners can be found in areas that many businesspeople assume would appeal more to young people. For instance, many elderly men are interested in sports cars. Many are accustomed to using personal computers and smartphones. The Internet is a familiar part of their daily life. They could contribute to the expansion of e-commerce.
We hope every corporation will sniff out the needs of elderly people and use their wisdom to develop or provide innovative products and services as well as cultivate new markets.
When baby boomers turned 60 in 2007 through 2009, consumption did not pick up as much as expected. Factors behind this included growing concern over whether these baby boomers could keep working until they reached 65, and sluggish stock prices after the so-called Lehman shock.
The government must help erase elderly people's worries for the future by, for instance, implementing policies that will ensure social security systems can be stably maintained.
If the willingness to spend among the elderly encourages greater consumption among working generations, the Japanese economy would undoubtedly have a bonanza.
(From The Yomiuri Shimbun, Oct. 8, 2012)