Japanese Baby Boomers Reluctant To Spend After Retirement

by Kim Walker 24 February 2010 16:07:57

Retiring baby boomers appear reluctant to spend on nonessential items, contrary to expectations that they would give Japan's economy a boost.

According to an article in Japans' Nikkei newspaper, some firms hoped baby boomers, who began to reach mandatory retirement age in 2007, would spend time enjoying their hobbies and other pursuits, creating demand for products and services.

But baby boomers appear hesitant to buy expensive items or spend on long trips, in part because they continue to work or must provide their children, who are struggling in the sluggish economy, with financial support.

Home appliance manufacturers expected that baby boomers--who were into audio equipment when they were young--would buy components for setting up home theaters. A full-scale home theater, combining a large-screen TV with equipment such as a Blu-ray disc player and speakers, costs up to 500,000 yen. Yet according to GfK Japan., the home-theater speaker market contracted 60% in 2009 from 2006. Sony Corp. and Pioneer Corp. officials said demand for equipment used in home theater systems has failed to increase since 2007.

As for travel, the average length of a high-end JTB Corp. tour package for seniors was 10.0 days in 2009, about one day shorter than in 2006. JTB has begun adding tours designed for seniors lasting a week or less, as well as tours during busy seasons, as many seniors are buying tour packages that take advantage of long weekends or national holidays.

According to a survey by Hakuhodo (advertising), only 16% of retirees spend their retirement pay for consumption purposes immediately after receiving it, while about half put it into savings. They note that baby boomer expenditures cover three generations -- baby boomers themselves, their children, and their grandchildren.

The children of baby boomers, who are supposed to form a core of the current labor force, face shrinking wages and unstable employment conditions.

Many baby boomers keep working after reaching mandatory retirement age, thus many people reaching retirement age fails to translate into an increase in leisure activity.

According to a Ministry of Internal Affairs and Communications survey, the ratio of the Japanese population working between the ages of 60-65 stands at 57%, up 4.4 percentage points from 2006.

Some in the travel industry suggest baby boomer spending will become more pronounced in or after 2012, when those who retired in 2007 reach age 65 and start receiving their national pension.

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