Demographic change
- Elderly population grows while total population declines

Elderly population will be increased continuously until 2030

Japan is called “declining population society”. After peaking in 2004, the country’s total population has been decreasing. However, the elderly population (people over the age of 65) is expected to grow continuously until around 2030 (Fig. 1-1). Therefore, the senior market is certainly growing. However, the dynamics of the market are not as simple as those in earlier high-growth period. You need to be thoughtful if you launch a business targeting ageing boomers or seniors. Otherwise you will never success your business.

Fig. 1-1 Trends in the Japanese population

Source: by 2005 Census Statistics Bureau “National Census Survey”; by 2007 Statistics Bureau," Population Estimates (annual) "; after 2010 the National Institute of Population and Social Security," Population Projections for Japan (December 2006 estimate)”

Many structural changes in markets are to be expected as the age ratio increases in mid- and long-term

Japan’s age ratio (the percentage of the population over 65 vs. total population) is expected to increase rapidly (Fig. 1-2). The population over age 65 in 2030 is expected to be 36.67 million, which is 31.8% of total population according to the projections by the National Institute of Population and Social Security (December 2006). Meanwhile, the working-age population (from age 18 to 64 years) is expected to be 67.4 million, which is 58.5 % of total population. This means that only 58.5 % of working-age population must support the 31.8 percent of the population that is elderly. It goes without saying that we need fundamental reform of the social security system before reaching this state.

Fig. 1-2 Percentage changes in elderly population

Source: Census, Population Projections for Japan (National Institute of Population and Social Security Research)

The policies of the current Democratic Party (DP) administration are the opposite of the Liberal Democratic Party’s after Koizumi’s reforms. The DP has tried to promote the growth of public sector and to compensate for the lack of tax revenue by issuing government bonds.

However, since S & P, a rating agency, downgraded the government’s bonds because of increased risk, issuing more bonds will be very difficult. Therefore, further expansion of the public sector through higher taxes also seems impossible. I do not think increasing the consumption tax can be achieved easily since the people have deep-seated feelings of antipathy toward higher taxes.

Given this situation, any party that takes power in the future will be forced to transfer public sector activities to the private sector. This is in order to increase management efficiency and revenue in many areas. Thus, expansion of private sectors is expected to continue in many markets in the mid- and long-term. This means an increase of business opportunities for private sectors.