2008.05.19 Behold the Spending Power of the Japanese Consumer

May 19, 2008
Behold the Spending Power of the Japanese Consumer
By Debbie Howard
Japanese consumers are among the most well-heeled and
sophisticated in the world, with consumer spending in Japan
reportedly accounting for approximately 11% of the global economy.
The term “fuyuso” is used to refer to “wealthy families with money
and education.” Estimates of the number of such households vary
widely -- from 1 to 3 million at the high end to as high as 10 to 11
million households if all assets are included.
Just as a guideline, however, according to the Asia-Pacific Wealth
Report produced by Merrill Lynch, the number of wealthy
individuals in Japan (those with over US$1 million in financial
assets alone) grew by 5.1 percent to 1.48 million in 2006,
representing the core group.
The report showed that Japan’s wealthy were worth less on average
than their Asia-Pacific peers: the average net worth in Japan was
US$2.5 million, compared with the regional average of US$3.3
million and global average of US$3.9 million.
However, wealth is both wider spread and more prevalent in Japan
compared to its Asian neighbors. Specifically, Japan’s wealthy
individuals own combined financial assets of US$3.5 trillion (46% of
the total assets owned by Asia’s wealthy individuals). In addition,
Japan’s wealthy individuals represent 59% of those in the Asia
region with over US$1 million in financial assets alone.
At the same time, there is also a growing divide in Japan between
“rich” and “poor,” and a consequent narrowing of the middle class
majority, a hallmark of Japan over the past decades. However, this
phenomenon continues to be far less pronounced than in other
developed countries.
For example, the average annual household income for Japan’s 47.5
million households is approximately 5.6 million yen; specific
segments exhibit far higher annual household incomes than this
already rather high average. On average, approximately 13% of
Japan’s households have household incomes of above 10 million
yen, and 1.2% of households are above 20 million.
The Dankai no Sedai (“Cluster Generation”), Japan’s post-WWII
“baby boomers” who began to turn 60 in 2007, number nearly 7
million consumers. It has been estimated that they hold combined
financial assets of 130 trillion yen (US$ 125 billion), or 10% of total
individual financial assets. Their annual household income is
estimated to be 7.35 million yen.
Then there are the Dankai Jrs. (“Baby Boomer Juniors”), a second
demographic bulge representing some 18 million consumers aged
28-37; their annual household income is estimated to be 5.50
million yen. Among this group are the so-called “Parasite Singles”
(young working women who almost single-handedly shored up the
economy during the hard times with their purchases of luxury
branded goods, dining experiences and travel). Their tendency to
continue to live at home with their parents – rent-free and with
many of their meals included! – leaves most of their salaries free for
their personal enjoyment.
Today’s Japanese consumer is not only rather well-heeled, but more
diverse and more open-minded than in the past, creating new
opportunities for foreign multinational companies. For products and
services that have evolved to serve developed markets (i.e., financial
investment products, advanced pharmaceuticals and medical
devices, and high-tech to name just a few), it may be more relevant
to consider the spending power of an individual consumer – not
necessarily the raw number of people in a given market.