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Japan's silver savers will bear the brunt of 'Abenomics'

36 Comments
By Stanley White and Lisa Twaronite

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36 Comments
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The thing is ... Japanese elderly have to pay too, we cant just expect the working people (getting fewer and fewer every year) to pay for these people in their elderly years. Sad but true.

Thats the problem with the pension system - it only works if there are workers, and recently, as people are having only one, or no children at all, there will be no workers in the future. Japan needs children, urgently.

Also with rising elderly population, comes rising costs of medical and social care. I wonder who will be expected to pay for that?

1 ( +3 / -2 )

They are 74-75 yrs old, 'When are they planning to retire??

-1 ( +4 / -5 )

you can not have.. fiscal reform, without monetary structural reform. The Americans have been doing fiscal and monetary reform for decades, only to create another bubble to replace the old, deflated one. Either that, or you need to create a new industrial base.. for growth. Whats more, one needs to structurally reform, government finances.. its cheaper to use the local population to produce food stocks, then to rely on other countries.. when one considers that food prices, and production costs due to the rise in fossil fuels, have in turn raised the procurement costs. ...thousands of acres of land are barren in this country.. that used to be rice paddies.. efficiency and innovation can only occur, when adversity rears its head.. not when one gives up.

-2 ( +0 / -2 )

I see this as a good thing. Japan cannot afford to continue supporting the elderly through taxes with its aging population. While it's something nobody wants to hear or admit, it's the truth. The next generations need to be able to save too.

-3 ( +4 / -7 )

As long as it's not manual labor, I think the oldies still have a lot they can contribute to society as a whole. In retirement, aside from forming droves of tour groups, most retirees spend their days vegetating at home.

-5 ( +2 / -7 )

implementing his plan to reverse deflation and revive growth. It may be just what Japan’s economy needs

Word to the economically illiterate: Printing money does NOTHING to grow the economy. It just creates more money, which makes prices higher. People that have fixed incomes, or savings, LOSE.

Contrary to what these journalists think, printing money DOES NOT revive growth.

The only thing that can revive growth is for the incompetent government thieves to get out of the way and let normal people carry on with their business.

3 ( +6 / -3 )

Silver savers bear the brunt? No English teachers and other migrant workers will. Because the industries they work in is always looking for excuses to reduce pay and increase workload. At least silver savers had a chance to save.

3 ( +6 / -3 )

As long as it's not manual labor, I think the oldies still have a lot they can contribute to society as a whole. In retirement, aside from forming droves of tour groups, most retirees spend their days vegetating at home.

Magnet, I do totally agree with you, and believe that those elderly in good health who are willing should be able to work, at least in a part time position, until they feel they cant or don't want to anymore.

HOWEVER the next few generations are going to have a very hard time in Japan. Those workers around are probably going to be forced to financially support their aging parents (and possibly grandparents too) because Japan just does not have enough money to give everyone over 65 the financial support they need. Those without family to help will obviously be given first priority for public care programs.

They are also (probably) going to be forced to offer practical care too - at the moment we are seeing an increase in young families living apart from their parents and grandparents as they move into the cities and marry, but I would imagine that this will reverse in the future, and more and more parents and grandparents will be forced to live with their children, due to a lack of residential homes and care facilities.

If there is a job available, with good money, and with good prospects, it should be the young people who get them. Keeping on "company assistant-Vice President Taro" at age 70 on a ridiculous salary, just because he has been working at the company for 45 years, is unfair to those who are going to be forced to support the elderly population of Japan. We need good jobs, with good salaries for the young. Taro can work as mos-burger, and probably still be fulfilled. For the young, its a matter of trying to obtain the standard of living which their parents and grandparents took for granted.

3 ( +4 / -1 )

Senior citizens in Japan have already taken big hits in their Social Security payments ... which have been reduced at least six times in the past decade. And even some company pensions have been reduced. I am in contact with a number of senior citizens who are just scraping by with their meager retirement payments ... and their daily lives are not becoming any easier. Moreover, not all old folks have huge savings stored away in banks, financial firms, etc. Many try to scrape by on what little pensions they are receiving.

If Abe & company want the senior citizens to pick up the tab in his planned 2% inflation increase, he (they) had better find ways of helping those oldsters who are at the bottom of the pile.

1 ( +2 / -1 )

Who pays once Abe's plan fails?

1 ( +3 / -2 )

Kimuzukashi, thanks, and yes, I completely agree with all of your points. I particularly agree with keeping incapable elderly executives on their high end payrolls simply because they have been with the company for as long as they have is unacceptable. The amakudari culture of Japan needs to die with that generation, and should have been eliminated long ago, before the economy went into the tailspin it's now in. Good points and thanks for sharing.

0 ( +4 / -4 )

American/Israeli-style 'get out of the way Gramps!' doesn't apply for Nippon. As noted in the article, Japanese elderly support the economy almost just as much as younger workers. THEY are the reason Japan can afford to spend so much on itself, as they support both government AND consumer spending. Japan may SEEM to be facing the same demographic & economic pressures as the West, but in truth they are NOT: Japanese productivity stays in Japan and is immediately reinvested (in Japan), whereas Western wealth is removed from the economy and sent overseas to rot in sheltered accounts.

Of course, it would be ABSURD to assert that Japanese deflation was engineered to shackle a generation too quickly exposed to Western ideology (via the Internet)... that, strengthening the hand/role of the generation responsible for Japan's economic success during the 70s, 80s, 90s was meant to ensure Japanese CORE values were neither abandoned nor shared... that, Japanese financial distress is just a smoke screen meant to keep away the KUROFUNE of increased financial & political demands from the Incompetents with whom they have been forced to deal. ...ABSURD!

;)

-2 ( +2 / -4 )

Japan's elderly are like overindulgent grandparents... So eager to teach, learn, and support. I just want to hug them all!

-4 ( +0 / -4 )

There is one point no one has mentioned. WE ALL GET OLD . So leave the elderly alone. If they can work and want to their is no reason to object. On the other hand their are younger, unemployed, people what will never work . They have an attitude problem that society owes them , thats that is the reason why less money is available for care of the elderly. Sorry for side-tracking . But Respect, The Elderly as thay supported you before you became employable.

3 ( +5 / -2 )

Abe plans to spend 100 trillion yen ($1 trillion)

100 Trillion yen is closer to $1.5 Trillion or did I miss something and the $1 is suddenly trading at 100 yen?

-2 ( +0 / -2 )

Ron - of course we all get old, but the "young, unemployed" people with attitude problems are an incredibly small percentage of the Japanese population. The elderly population is not a small percentage at all. Its like comparing apples and bananas.

If we take your example of the average "NEET," probably the only jobs they will be eligible to apply for are things like restaurant work, part time, unskilled positions, and the elderly are quite possibly stealing the jobs of the young, as they can work for much cheaper, without any obligation of promotion if they stay for a long time.

0 ( +2 / -2 )

On the other hand their are younger, unemployed, people what will never work

kimuzukashiiiii is correct. The vast majority of young people want to work. And let's not forget there are older people who retire the second they are able to and then never do anything except enjoy themselves. That's fine, but older people shouldn't be made out to all be selfless martyrs. They also tend to be the most conservative people in the country, people who constantly hold political reform back by thinking change automatically = bad.

My view is that society should respect their elders and seek to learn from them. But a country must do what is best for future generations, rather than pander to a class that world-wide holds pretty much all the assets and cash. People say "what about the old" and I would say "what about the young who have all the debt and poor/uncertain job prospects". I'm not saying I support hyper-inflation, but I think a disproportionate amount of time is spent worrying about that sector of society that needs the least help - compared to the young, anyway.

2 ( +4 / -2 )

Innovation, dedication and education is what drives an economy. These fools that think that debt and inflation drive an economy will be in trouble -and it is a scary thought for the years to come especially with an aging population. I would rather pay off all debts and have a huge pile of assets (preferably in physical gold) to drive the future economy. By taxing the old/young thru inflation you are selling the whole populace down the river (like those pigs in China). It is not all the politicians fault since all fiat currencies are inflating (printing) right now = Japan had to do something at some point.

This inflation will hurt all savers -young and old. --> Don't think just because you are young you can escape this by being able to work. If anything, more tax breaks should be given for the old to spend their money on the young and innovation (education/research etc). Debt thru education can drive the economy (and I would support this) but it cannot be like SK.

People need to move away from this inflation model and go into physical assets that will hold value or find ways to reduce costs (inflation makes things cost more). Investments in natural resources will be good also. Support innovative Japanese companies, Japanese companies going global, local companies. =Find the innovative people in Japan and support them.

=People should be protesting this inflation while also asking the Gov to reduce spending 2-3% every year. The best way to protest this would be to turn your back on Japan Yen (fiat debt) and go physical gold/silver --> hopefully the Gov will listen at some point.

4 ( +5 / -1 )

@badsey3

Well said! The key problem here is "mal investment" and bad allocation of resources. Japan doesn't need more concrete poured over nature and "bridges to no where". What the do need is affordable daycare. Perhaps older people who are qualified and able could work in public daycare...more ideas to come.

0 ( +1 / -1 )

The elderly might become even more frightened to spend. It seems like the psychology here in US. Bank CD rates is way below inflation, feeling robbed by the Fed, discouraging spending! Why? With less purchasing power they rather sit tight and try their best to have enough for their retirements. Their financial advisers may even encourage them to take risk and shift to foreign investments with higher yields. This means no new cars, no 'forced' vacations to consume the weakened savings. This means Abenomics won't work!

"A spokeswoman for the prime minister’s office, Hikariko Ono, said in a written response to Reuters that retirees’ purchasing power would not decline because pension payouts are linked to changes in consumer prices." Clever talk! The underlying principal is losing purchasing power, at least I notice!

1 ( +2 / -1 )

bruinfan - daycare? Do you mean daycare for old people or day care for kids?

If the former - nice idea! Those who are in their 60s, forced to retire, and still genki could really help in facilities like day service, where the people who attend are still relatively physically and mentally well. These facilities are often very short staffed (as with many pink collar jobs, low status, low pay, low prospects but very hard work) and could easy use these elderly people for help doing tasks like making tea, organizing events, or helping with daily activities.

If it is the latter, it is a horrible idea. Why would it be a good idea to put a group of active, super genki kids who are prone to fighting and running away with a pensioner who probably has health problems, stiff joints, and may be hard of sight or hearing?

What will we do when Taro JR answers back and the pensioner belts him, as "they used to do in my day?"

Not to mention the fundamental problem that, to work as a public "Hoikushi" (Licensed nursery school teacher) in a public facility (which is where the spaces are lacking) you need, surprisingly, a license. Even the licensed teachers have a turnover rate of 2-3 years, because 1 - the job is physically very hard, 2- the hours are very long, (usually 8-9 hour shifts + overtime, no breaks, and very few holidays) and 3 - absolutely crap pay. Starting rate is usually about 18man a month before tax, shakkai hokken etc for a new graduate. Even after 20 years in the job, your probably not going to have got past the 20man mark, unless you make Encho.

Thats before you get started on stuff like "monster parents" making the job absolute hell.

Day care facilities are very much needed... but bring in the over 70s to work as nursery teachers? A recipe for disaster. IMO.

1 ( +1 / -0 )

“The future is uncertain.”

You're both mid 70's. Yes it is. I'd say retire already and enjoy life now.

1 ( +1 / -0 )

they could just reform

0 ( +0 / -0 )

As noted in the article, Japanese elderly support the economy almost just as much as younger workers.

No, they really don't. It's nice to see that work ethic continues after employees are well past their useful peak, but older workers should not be getting paid more than younger workers, who are the ones who are really making the productivity contributions. I'd be happier to see older workers stay on if they didn't expect to keep their inflated salaries and perks.

My girlfriend's company is trying to downsize, but there are simply too many chiefs and not enough braves. The almost exclusively male, overaged managers simply do not earn their salaries. They don't even deserve the smaller salaries of the genuinely productive workers who they're trying to get rid of.

1 ( +2 / -1 )

It's essentially an attempt to unlock the massive vault of elderly and retired savings in Japan to create a flow of cash into the society that will stimulate business and promote inflation. The upside is jobs, more prosperous business and the ability to collect more tax revenue which Japan needs to start servicing it's debt - which they must do. Having the old and retired locking their Fiji sized mountain of cash away in banks has allowed Japan to finance massive debt, and not much more. I can see the sense in this.

1 ( +1 / -0 )

but it will come at the expense of Japan’s fastest-growing demographic group: its so-called “silver savers,” elderly Japanese like the Kinugasas who helped build Japan into an export-driven industrial powerhouse in the 1970s and 1980s, and who are preparing to live off their savings and pensions.

The problem is these silly savers put their money in 'safe' post office accounts that don't earn enough return. They should have had the courage to manage their money better and achieve a higher return. If they had done this they would already be ahead of the curve. But Japanese tend to be overly risk averse.

0 ( +1 / -1 )

At least silver savers had a chance to save.

and to invest that money in real assets.

0 ( +0 / -0 )

Keeping cash in the bank, over a six-month survival cushion, is unwise as the cash value decreases. Even worse are bonds. Gotta keep your wealth in something no government can depreciate, a real store of wealth.

-1 ( +0 / -1 )

It's essentially an attempt to unlock the massive vault of elderly and retired savings in Japan to create a flow of cash into the society that will stimulate business and promote inflation.

The most successful pension funds do not risk other life time saving in the risky investment such as real estate, stock market and infrastructure. Japanese large co-operation lost many billions in 2012. Elderly are more likely to spend a lot for their deteriorating health. Health sector will benefit from their spending. They are not responsible for financing loss making industries. If that investments failed, who will foot the bill for their very old and very sick days? Bank deposits are safer although return is lower.

As resource poor nations, Japan have to import most of the commodities and food from oversea. Promoting inflation means consumer have to pay the higher price. Even salaries will increase, it is hard to catch up with rising inflation.

http://www.arabnews.com/sovereign-wealth-funds-hit-record-56-trillion-year-end

The upside is jobs, more prosperous business and the ability to collect more tax revenue

Pumping trillions of money will make more employment opportunities and business expansion. However that growth is not driven by market. Government borrowed more and stimulate the economy artificially with more and more debt. It is unsustainable due to EU style mountain of debt. Real economic growth comes from consumer confidence and rising exports.

Business prosperity come from innovation and competitiveness like Apple and Samsung. Not unsustainable government intervention. Making debt for repaying debt will become another ever rising debt ceiling crisis like US.

In Australia, Future fund is trust for retirement fund for public servants. Government will not spend any cent for risky investments. Future fund is belong to future. Not at present.

1 ( +2 / -1 )

Zenpun

The most successful pension funds do not risk other life time saving in the risky investment such as real estate, stock market and infrastructure.

Investing money in real estate, stock, bonds etc is exactly what Superannuation funds do. The money is not locked into banks - it is pumped into the system which helps to stimulate all kinds of industries. The Japanese have taken money earned from the system and locked it away - removed it from the system. And they get a very paltry 0.25% for the privelege.

They are not responsible for financing loss making industries.

Maybe not, but their wealth is the product of the system and they are still citizens of the country - albeit retired. They have a responsibility to finance the debt as much as anyone else, and if a small redistribution of their wealth helps to do this, as well as stimulate the economy, I see the sense in it. You have to keep in mind, the cost to the individual is not going to render them destitute by any stretch of the imagination. Most will barely notice it.

Even salaries will increase, it is hard to catch up with rising inflation.

Inflation is normal in a healthy economy. Stagnation and deflation is not.

However that growth is not driven by market

This is a measure for stimulation and taxation whereby the government does not need to borrow or go deeper in debt. They are trying to flush cash into the economy by unlocking thet tsunami of cash held in the tightly closed vaults of the retired. It's an internal measure, and it helps them to get their hands on some of the coin they need to pay their debts.

0 ( +2 / -2 )

Tamarama, that was an excellent post.

Gold bugs seem to be infesting the system again, not only with their counter-productive arguments about some fictional "hard asset" (gold?) but also with their phobia regarding inflation.

The proper role of the government regarding macroeconomics is to create an environment conducive to growth - one that encourages consumers to spend ("The product will not be cheaper next month!"), companies to invest ("They're buying now - frozen money is being liquidated, so let's ramp up production.") and investors to be smart.

That said, a 20% tax on nominal gains - particularly from government bonds, overwhelmingly bought by the elderly - is punitive if inflation really does take off - otherwise, the elderly could actually lose a bundle. It should be no more than 20% on real gains. Do you have any info on that, Tamarama-san?

2 ( +2 / -0 )

Tamarama

Investing money in real estate, stock, bonds etc is exactly what Superannuation funds do.

Not all superannuation funds performance are same. Some sovereign funds such as Singapore Taesmask, Norway govt pension fund and China safe investment company are identical with Australia future fund. The beauty of Canada and Australia is prudent about retirement money. They discourage unpredictable risks taking such as real estate, stock and bond is what other pension funds evaporated their funds.

http://www.brookings.edu/research/papers/2009/04/23-canada-nivola

http://en.wikipedia.org/wiki/Australian_Prudential_Regulation_Authority

In USA, many retirees lost their fortune because of the market turmoil back in 2008. Due to their old and frail age, they will never get another job or their prime success of life time. The moral of theory is you only young once.

Japanese have taken money earned from the system and locked it away - removed it from the system. And they get a very paltry 0.25% for the privelege.

Japanese risked too much for real estate and stock market back in 1980s. After getting the bubble, it has never recovered with pro long recession since 1991. Steady cash flow is better than high risk, high return investments.

Inflation is normal in a healthy economy. Stagnation and deflation is not.

During the WWII, Japanese currency was hyper inflated. Consumers have to pay tons of cash for daily essential things such as groceries and fuel. In the theory, inflation is normal. However higher price will make consumers make more caution about their consumption. It will impact the consumer sentiment.

If Japan is self sufficient for food and energy, inflation should be concern a little. However Japan is very dependent on others for energy and raw materials. It is highly questionable about healthy economy or not!

flush cash into the economy by unlocking thet tsunami of cash held in the tightly closed vaults of the retired.

Flushing cash is easy. Getting back the whole capital in short or medium term is very changeling. For example, building shinning airport and highway from airport to near by town cost 3 billions. How many years have to wait for getting back the whole 3 billions? In some cases, it may take more than 25 yrs. In China, there are many ghost towns with high rise buildings, ghost shopping malls and ghost luxury ships. Ghost means nobody there! Japan population is 10% of PRC. It is even harder to get back the initial investment due to smaller domestic market.

0 ( +2 / -2 )

Abenomics won't work and, in the interim, will lead to pain for all.

1 ( +1 / -0 )

Bet the Cypriots are wishing they had preserved their wealth in hard assets right about now. Savers everywhere beware of banking/government shiesters. Taxation by currency devaluation or outright robbery; take your pick.

1 ( +1 / -0 )

"A spokeswoman for the prime minister’s office, Hikariko Ono, said in a written response to Reuters that retirees’ purchasing power would not decline because pension payouts are linked to changes in consumer prices."

Well, Ms. Ono, that's just fine for retirees with no savings and who live off pensions, but what do you have to say to younger workers who are trying to save money and whose purchasing power will plummet?

The most disgusting thing about Abenomics is that the people hurt most by these policies are the very people -- diligent savers who live below their means, resist the urge to live recklessly, and who put the future ahead of the present -- who are the cornerstone of a civil society. It's as if Abe wants everyone to turn into a dissolute spendthrift who doesn't save a single yen. The social costs of incentivizing people to live like that will outweigh whatever corporate profits he's looking to generate by stealing from savers.

1 ( +1 / -0 )

Gotta go to work so I can earn more money........

0 ( +0 / -0 )

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