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.
Debbie Howard is Chairman of CarterJMRN and President Emeritus of the American Chamber of Commerce in Japan.
Originally Published in Nikkei Weekly, 19th May 2008
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