Let’s talk about the silver economy today. This topic has been frequently mentioned in recent years. However, I recently gained a very different perspective on the silver economy, which comes from the new book Silver Economy: Economics of the Elderly by Japanese scholar Kenichi Ohmae. Although the book focuses on Japanese society, it still provides valuable insights for understanding the phenomenon of the silver economy.
In the past, when we mentioned the silver economy, we usually thought of two things. First, if a country enters an aging society, providing good products and services for the elderly is definitely an important business issue. Second, with enough products and services, the elderly will consume more, which in turn can boost the economy.
However, Ohmae presents a different perspective in his book, which is the core of Silver Economy: Economics of the Elderly. He argues that it is only when the elderly spend more money that Japan can solve its low birth rate problem.
Yes, that’s right: Ohmae believes that encouraging the elderly to spend money is not the ultimate goal, but rather a means to an end. The real objective is to solve Japan’s declining birthrate problem.
At first, this conclusion might seem a bit strange. The consumption of the elderly and whether young people are having children seem to be two different issues. But how are they related?
Before explaining Ohmae’s viewpoint, we need to provide some background. As one of the earliest scholars to study social aging, Ohmae’s influence has been growing over the years. His earlier works, such as The Low-Desire Society, M-shaped Society, and The Borderless World, not only sold well but also contributed new terms to the academic world.
However, it’s important to note that Ohmae is not simply an academic scholar; he also maintains a unique relationship with the Japanese government. To understand his views, we must first understand this relationship.
First, he once served as a senior trade official in the Japanese government, and even after leaving office, he continued to offer advice to the government.
Second, if his advice is not accepted, he will criticize the Japanese government, from officials at all levels up to the Prime Minister. And the elderly gentleman even writes these criticisms in the prefaces of his new books. For example, if there’s a three-year gap between this book and the last one, he will include all the criticisms he’s accumulated over those three years in the new preface. If you collect all the prefaces from Ohmae’s works, they would almost form a book-length critique of the Japanese government.
Third, despite criticizing the government, Ohmae has also been involved in nurturing talent for the government. For example, in 1994, he founded an organization called “Isshin-juku,” which is a type of private school. He would guide his students’ theses, submit them to relevant authorities, and urge them to implement the suggestions. If they were not implemented, the heads of those relevant departments might find themselves criticized in the preface of his next book. Many former students of Isshin-juku have gone on to become Japanese lawmakers and local politicians.
In other words, some of Ohmae’s books don’t represent definitive conclusions, but rather serve as a middle ground in his communication with the government. His books document his process of communication with the government, as well as related research and thinking.
Now, let’s return to the main point of Ohmae’s latest book: only when the elderly spend more money can Japan solve its low birthrate problem.
So, how did he reach this conclusion?
Let’s start with the current situation in Japan. How serious is Japan’s low birthrate problem? In 1980, 19.8% of households in Japan were single-person households, but by 2020, this number had risen to 38%. Yes, it doubled. It’s roughly equivalent to four out of every ten households in Japan having only one person.
Japan also has another statistic called the “standard family,” which refers to a household with two parents and one child. How many such families exist? Only 25%. According to estimates by the Japan National Institute of Population and Social Security Research, by 2040, single-person households will make up 40%, while standard families will shrink to 20%.
Moreover, Japanese people are not only unwilling to have children, but they are even avoiding relationships. According to Japan’s “16th Basic Survey on Birth Trends,” among unmarried individuals aged 18 to 34, only 21.1% of men and 27.8% of women have a partner or are engaged. The number of men who have cohabited is 6.4%, and for women, it’s 8.2%. Among this group, 53% of men and 47.5% of women have had sexual experience. And over 70% of unmarried people believe that being single is easier, freer, and has less financial pressure.
Has the Japanese government considered solutions? Of course. To encourage family child-rearing, Japanese women who are pregnant and hold a Maternal and Child Health Handbook can receive a subsidy of 100,000 yen. This subsidy is given in the form of coupons. 100,000 yen is approximately 4,660 RMB. However, Ohmae believes that this subsidy is just a drop in the bucket.
So, how can this issue be resolved? Ohmae suggests that since the reason people don’t want to have children is financial pressure, could the government ease that financial pressure further to encourage childbearing?
Regarding this issue, Ohmae has a former subordinate, Toshimitsu Motegi, who has recently been in the news. Motegi, who previously served as Japan’s Minister of Economy, Trade, and Industry, recently announced his candidacy for the presidency of the Liberal Democratic Party. Motegi proposed that Japan should adopt the “N分N” tax system, which originates from France. In 2020, France’s fertility rate was 1.83, which is relatively high among developed countries.
The N分N tax system is not complicated. In the past, taxes were levied on individuals, but under this system, taxes would be levied on families. The total family income would be divided by the number of family members, and taxes would be imposed based on progressive tax rates, where the more you earn, the higher your tax rate.
Ohmae believes that if Japan adopted this tax system, the tax burden for young families would decrease, as the presence of children would reduce the taxable income of the household. This could encourage young people to have children.
However, this suggestion was not accepted by the Japanese government, as it would primarily benefit single-income households rather than dual-income households, and the government wants more dual-income families in society.
Of course, Ohmae did not accept this reasoning. He believes the tax system can still be reformed in a more detailed way. In the end, neither side convinced the other. During this process, Ohmae also proposed some more radical ideas, such as relaxing the household registration system for children born out of wedlock. He argued that the identity of the father should not matter as long as the child was born to a Japanese woman. But once again, no one was persuaded.
What to do next? Ohmae began calculating another account: the debt burden on Japan’s children. That is, the debt that each child inherits from birth. Ohmae states that Japan’s national debt, as of June 2023, had reached 1,276 trillion yen. If this debt were divided among all citizens, each person would be responsible for over 10 million yen. Similarly, even newborn children inherit this debt.
So, how did Japan incur this massive debt? Ohmae argues that one of the key reasons is the government’s continuous policy of subsidizing activities that encourage debt. For example, Japan has regulations that prevent the average price of gasoline from exceeding 170 yen per liter. If it does, the government provides subsidies to oil distributors. But where does this subsidy come from? It comes from taxes. Ohmae believes that these continuing subsidy policies are effectively increasing Japan’s debt burden. If a child is born already owing 10 million yen, doesn’t that make people even more reluctant to have children?
In other words, the key to solving the low birthrate issue is to activate Japan’s economy. How to activate it? The country’s wealthiest group—the elderly—must start spending.
How wealthy are Japan’s elderly? According to Ohmae, Japan currently has 2 quadrillion yen in personal financial assets, 60% of which is held by the elderly. What does 2 quadrillion yen mean? The largest oil exporter in the world, Saudi Arabia, exports about 20 trillion yen worth of oil per year, which means that the financial assets held by Japan’s elderly are equivalent to Saudi Arabia’s oil exports for 100 years.
Moreover, in Japan’s cultural society, saving money is encouraged. It is said that the average Japanese person leaves more than 30 million yen in cash upon passing, and most do not have debts. Once they’re gone, the money is left unspent, which is a common phenomenon in Japan. If Japan’s silver economy is activated, it means that 1,200 trillion yen of financial assets will flow into the market, providing a huge boost to the economy.
So, how can Japan encourage the elderly to spend money? Ohmae has some interesting ideas.
First, society’s culture must change. That’s right—before thinking about how to earn money from the elderly, providing products or services, the first step is to change societal culture and perceptions.
For example, instead of always referring to the elderly, we should refer to them as the “silver generation.” The two terms give different impressions. “Elderly” sounds like a frail, stay-at-home group, while “silver generation” implies vitality.
Second, Ohmae believes that everyone should develop hobbies
or develop a group of friends. Japan’s senior citizens often face two problems: lack of social circles and a lack of goals. If elderly people had more social activities, they would naturally spend more money.
Finally, there must be more leisure-time products specifically aimed at the elderly. For example, recent technological products like VR glasses or health supplements. These products not only appeal to elderly people but also create new needs. It’s important to focus on providing services that activate the elderly, not just for the sake of economic growth, but also to ensure they live fulfilling lives.
