TT-415 -- More on Dankai retirements

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, April 01, 2007 Issue No. 415


- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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If you were asked, "Which period between 1940 and now led
to the largest loss of male workers from Japan's economy?"
You probably would answer World War II, since during the
period 1939 through to the surrender in August of 1945,
around 2,000,000 soldiers, over 3% of the population,
perished in the pursuit of Emperor and empire.

However, in fact the period of greatest loss (but not
necessarily loss of life) of males from the Japanese
workforce is in fact just about to occur, when the postwar
baby boomers, the so-called Dankai generation, start
turning 60. Between now and 3 years hence, 6.8m mostly
males will be leaving the workforce, and some 2.2m of them
will do it this year. This is a stupendous number -- more
than 3 times the number of those fallen in WWII and
representing about 10% of the nation's labor pool.

While comparing the loss of manpower in the workforce to
war losses is a bit unusual, it does help us appreciate the
scope of change that it about to engulf us -- both
economically and socially. There has been tremendous
speculation in the Japanese press about what will happen
once all these people, many of whom have healthy nest eggs
of up to JPY50m to retire on, leave their factories and
offices for the last time. There is no doubt that the
repercussions will be widespread. Some industries will be
rejuvenated by the fresh influx of cash and time spent by
retirees on their new pursuits, while others will be hurt
by the costs and loss of skilled manpower.

[Continued below...]

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[...Article continues]

The basic feeling of economic experts is that for the
3-year wave of retirements, many companies are going to be
feeling the economic pinch as they pay off the retirement
bonuses due. More than 90% of mid- to large-sized companies
have employee retirement fund programs, and Goldman Sachs
estimates that the pay-out obligations for 2007 through 2009
will total JPY41.7trn (US$356bn). This is a JPY7.5trn
(US$64bn) one-time blip in corporate cash flow that is going
to make itself felt sooner or later.

While most employers have created sufficient reserves for
such pay-outs, we suspect that some in the manufacturing
sector have been less diligent due to the recession of the
1990's. These firms will be looking to the banks to help
them out -- offering the argument that once the retirement
wave is over, costs will come down. However, our sense is
that as younger capable managers fill the vacated senior
slots, they are going to want more performance-based pay,
thereby diluting any savings benefits. This will lead to
senior managers incorrectly assuming that they can earn
their way over the hump -- leading to cash flow problems
down the line. We imagine this will trigger a corresponding
increase in corporate takeovers.

The wave of retirements will definitely bring about some
interesting socio-economic changes. Not having a "family"
of like-minded salarymen to report to every morning will be
a big shock for most male baby boomers -- who have been
described as the "generation waiting for instructions". They
will be forced to make lifestyle changes and as a result,
many will become angry, upset, and confused. We expect
the suicide and divorce rate to soar as a result.

The problem, of course, is that many of these men have
followed a rigid routine for the last 40 years and find it
very difficult to make friends outside their work --
particularly with their alienated wives. As a result, they
are likely to become part of the statistics contributing to
the pending divorce surge we wrote about several weeks ago.

After the divorce, the future is unremittingly bleak for
many of these male retirees. A recent OECD survey found
that Japanese men are amongst the loneliest in the world,
with 16.7% of males rarely or never having contact with
friends or colleagues outside work. However, with Need
being the Mother of Invention (and life changes), we
imagine that a growing number of retirees will realize that
to save their marriages, they have to start a new life and
get to know their partner again.

This probably means moving, and where better than Okinawa?

Apparently more than 50,000 mainland Japanese have moved
to Okinawa over the past five years, and the Prefectural
government reckons that at least 40,000 retirees will be
buying into the island lifestyle in the next five. The
retirees as a group are estimated to bring about JPY80bn
(US$680m) in new cash into Okinawa's economy, individually
up to JPY50m each. Needless to say, this is creating a
boom in luxury apartments on the island and realtors now
run house-inspection tours for buyers looking for condos
ranging from ¥50m to ¥160m. One such new condo development
still being built is already sold out. And just in case a
top-up is needed, the Okinawa Bank is offering home loans
to the retirees -- even though they are no longer working
or earning regular incomes.

If Okinawa is too far away, then there is still the chance
to go fishing nearer to home. A president of a Shiga
company that buys and sells used power boats told the
Nikkei recently that there has been an upsurge in purchases
by baby boomers wanting to do some angling after
retirement. He says that there is a severe shortage of used
eight-seater boats in the JPY3m (US$25,600) range.

Those retirees who don't find bliss playing golf on a
tropical island or fishing from their own boat, know that
an unfriendly wife awaits them at home. Challenged to
occupy their days in silent rejection, 91% of them are
apparently concerned about survival during retirement, and
it isn't hard to imagine that after a break of 1-2 years
and some fun on the stock market and buying expensive
luxuries/toys (boats, trips, cameras, cars), most will
probably start working again.

This will create a boom in elderly "advisors" who can help
either their old company or foreign competitors for a
fraction of their former salaries. At a market rate of less
than 30%-50% that of younger workers, these oldies have one
important thing to offer -- their personal network. You
can't beat an introduction to a new client that is kicked
off by a phone call from your guy to the CEO of the target
on the basis of their having gone to school together.

Apart from advisory positions, some retirees will also find
their way to Asia, helping set up off-shore factories.
Others will continue day-trading at home, playing exchange
rates and stock market IPOs -- and using the proceeds to
indulge themselves. If nothing else, they will have the insider
knowledge of their old companies to see them through the
first couple of quarters! Still others will turn their hand
to setting up new companies. We've been told in the past
that Japan has one of the world's highest percentages of
first-time entrepreneurs aged over 55.

One positive side effect of the mass retirements is that
it will force both the general working public and the
government to realize that the current employment and
pension system can't go on the way it has. Simply putting
up social insurance taxes (Shakai Hoken) and doubling the
Consumption Tax isn't going to cut it. The relentless growth
of an aging population will eventually drown out the extra
contributions. We hope that the emerging public awareness
stimulates a lot more debate and that people come to their
senses. Either the retirement age has to go up
substantially, or pensions have to be eliminated (leaving
only needs-based benefits), or immigration needs to go on
the front burner again.

We can guess which it is to be, and consequently look
forward to retiring at the ripe old age of 75 some decades
from now...!


Did anyone else notice that via the Ways and Means trade
subcommittee, the US Democrats have told President Bush
this week to take swift action on "currency manipulation" by
China and Japan? The Democrats appear to be trying to pin
the huge US trade deficit on the two Asian economies,
saying that both countries are artificially keeping their
currencies weak versus the dollar. The Democrats charge
that China and Japan are in effect providing unfair
subsidies to their indigenous manufacturers. If this push
gains traction, the US could issue punitive tariffs on both
countries, potentially to the amount that it thinks the
respective currencies are undervalued. This would be a good
way for the USA to damage the excellent relationship it has
with Japan and we hope it doesn't happen.

...The information janitors/



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+++ NEWS

- 13m individual shareholders
- JPY40trn foreign currency assets held by individuals
- HSBC to set up retail operations
- Deflation not over yet
- Goldman in for Pachinko play

-> 13m individual shareholders

According to the Japan Securities Dealers Association,
there are now 13m people in Japan aged 20 or older who now
hold shares. Most of these are through approximately 11m
online accounts. (Source: TT commentary from,
Mar 28, 2007)

-> JPY40trn foreign currency assets held by individuals

Individuals are not just buying a lot more stocks, they're
going for FX trading and foreign securities as well.
According to the Nikkei, they now hold JPY40.03trn
(US$342bn) in foreign-currency assets, up from JPY20trn in
September 2003. The new milestone now marks 2% of Japan's
JPY1.54qdrn (quadrillion) household savings. The newspaper
reckons that individual holdings of foreign financial
assets is helping to off-set the impact of foreign hedge
funds doing carry trades, and thus keeping the yen rate
low. (Source: TT commentary from, Mar 31,

-> HSBC to set up retail operations

HSBC will set up a retail banking operation next year and
expand to around 50 branches within four years. HSBC plans
to make the network appeal to upmarket customers,
particularly retirees, with wealth management services. The
first branch will apparently be in the Ginza, in keeping
with the spiffy image the bank wants to present. (Source:
TT commentary from, Mar 31, 2007),20867,21475530-36375,00.html

-> Deflation not over yet

While the BOJ may be upbeat about Japan's economic
momentum, we were reminded that Japan is still only barely
hovering over the break-even line on deflation-inflation.
Apparently February consumer prices fell 0.2% from a year
earlier, the first drop in 10 months. This coincides with
the nation's industrial output also falling slightly in
February. On the bright side, consumer spending rose 1.3%
-- maybe some of those Toyota bonuses are finally starting
to hit the economy? (Source: TT commentary from, Mar 30, 2007)

-> Goldman in for Pachinko play

We wonder why it took so long. Goldman Sachs has decided to
become the first major foreign fund to start investing in
Japan's largest industry -- Pachinko (Japanese pinball and
slots). Goldman has just purchased 9% of pachinko machine
maker Aruze Corporation for JPY26bn (US$222m). The
investment not only gets Goldman into Japanese pachinko,
but also by virtue of Aruze's 24% stake in Wynn Resorts,
back into Las Vegas as well. (Source: TT commentary from, Mar 30, 2007)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.


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In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

-> TT413 -- Tamiflu. We related the very personal story of
a family member having a negative reaction to Tamiflu and
warn that for us at least, the neuro-psychiatric threat was
very real. We got loads of response on this, including a
number of print and TV media enquiries.

*** Our reader says: Since reading your column, I have been
paying closer attention to news related to Tamiflu and the
latest thing I heard is that doctors are supposed to tell
parents to supervise their kids very closely if they use
the drug on them. It seems that your doctor didn't
communicate that to you and your wife?

*** We respond: Actually it was an evening nurse at a local
hospital's out-patient facility who dispensed the medicine.
Since we told her we didn't like using it, maybe she
thought we were already aware of the dangers. So, no, we
weren't told to closely monitor our child. We know that
now, of course.

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