by Debbie Howard
As a consummate Japan watcher for nearly 35 years, I’ve often commented on the changing psyche of the Japanese consumer. We “Westerners” (i.e., North Americans and Europeans) have long held the belief that Japanese consumers are homogenous, that they are “followers,” that Japanese traditions are immutable. But this is not quite true. In reality, the Japanese market shows clear segmentations and there are three generations you should watch out for.
The Japanese market is segmented and not homogenous
These days, in addition to engaging with a consumer that is clearly more self-responsible, more independent, and dare I say it – more individualistic – we are also seeing differences in attitude and behavior based on generational divides.
CarterJMRN has been following trends related to generational segmentation for over three decades now; a few key facts show how these notable segments are developing over time. The good news is that greater variety among Japanese consumers means more clarified opportunities for marketers, including foreign companies working to leverage success in Japan.
Let’s take a tour of Japan’s most notable (and profitable) generational segments
Japan is the most aged (and most rapidly aging) country in the world, facing an unprecedented challenge while it literally creates its roadmap for the future.
Based on available consumption and disposable income data, we know that those in older age groups – beginning in the mid-fifties – raise their consumption levels considerably compared to their earlier years, and continue to spend at a much higher level throughout retirement.
Indeed, some have valued spending among “those aged over 60” in Japan as already surpassing 100 trillion yen annually.
The Dankai no Sedai (“Cluster Generation”) Leads the Pack in Terms of Attention
Japan’s post-WWII “baby boomers” are now aged 70~72, and hold huge wealth (estimated combined financial assets of 130 trillion yen – US$ 125 billion – or 10% of total individual financial assets), with an average annual household income of 7.35 million yen. Born from 1947-1949, this demographic bulge represents nearly seven million consumers.
They are perhaps the most lucrative (and certainly the most talked about) sub-segment of Japan’s nearly 45 million 65+ consumers. However, as part of the overall aging phenomenon story in Japan, the Dankai are not the only game in town.
Right on their heels are those aged 50 to 69, a group that is not as frequently addressed, but that nonetheless represent one-quarter of the population themselves, with well over 7 million representing each of the four 5-year brackets (50~54, 55~59, 60~64 and 65-69). They are quickly moving toward their retirement years, with higher consumption levels guaranteed from the mid-50s. We’ll be reporting more on this group and its sub-segments in the near future.
Dankai Junior (or Baby Dankai) – The Next Huge Bulge in Japan’s Demographic Pyramid
The Dankai Junior are now aged 40-49 years, and represent approximately 19 million people, or 14% of the Japanese population. They are not only an extremely large and tightly defined demographic group; they also possess about 20% of the total purchasing power in Japan (48 trillion yen per year).
In addition, they are approaching their 50s, when again, Japan consumers are peaking in their salaries, have often finished off paying most of their mortgages and have funded their children’s education – meaning they generally have increased capacity to spend.
But Wait – Here Comes the Reiwa Generation!
It is already looking quite possible that Generation Reiwa, those in their 20s now, will have better lives, more economic stability, and more money than their parents. Abenomics has arguably created a reversal of decades of economic downturn and, currently, only 2.5% of Japanese are unemployed.
Representing some 13 million people (just under 10% of the overall population), they are benefitting greatly from Japan’s shrinking population. As the Japanese population dwindles, these youngsters enjoy more scarcity value by the day. They are already able to negotiate better work conditions, like full-time employment with benefits, and higher salaries than those before them.
And the (Perhaps Even Luckier) Dwindling Youth of Japan
Much has been written about the near-flat birthrate of Japan (1.44 births per woman in 2018, compared to 1.80 in the U.S. and the U.K.), with just under one million births per year.
What this means for children aged 0~9 and 10~19 years is that there are fewer of them, and they are all the more treasured because of it. And because of the longevity of Japanese society, these children more than likely end up having at least SIX adults (two parents, four grandparents) on which to depend for birthday presents, annual New Year’s otoshidama (money gifts). This lucky group has sometimes been called “six pocket angels.”
What about conflicts and cooperations?
The effects of the aging phenomenon in Japan are widespread and span all generations, with the result that there are bound to be conflicts; yet the Japanese are also masterful at finding ways forward with cooperation in the service of greater harmony.
Some otherwise urbanized 20-somethings are making moves to the countryside to be near (or sometimes to live with) their grandparents. They cite less stressed lifestyles, while the grandparents end up having much needed support.
Grandparents – who are of the wealthy dankai group – are sometimes depended upon for funds when things go wrong for their dankai junior adult children who may not have amassed enough money yet to buy a house or deal with an emergency.
Many women (and more and more, men, too) aged in their 40s and 50s are having to take on “parent care” responsibilities while at the same time still raising children under and of college-age. In addition, they are at the peak of their careers and might be required to take time off from work in order to meet their caregiving responsibilities.
So what does greater generational segmentation mean for companies?
Clearly, the opportunities for marketing products and services in Japan are better than ever – but these new and more complex differences must be taken into account when developing effective marketing strategies.
For most products and services, a “one size fits all” approach is no longer viable. Companies need to view these distinct groups in terms of both customer expectations, as well as communications and messaging.
Long a challenge for Western marketers – Japanese consumers have begun to create new and different lifestyles for themselves, including having greater tolerance for nontraditional and intergenerational life paths. This is good news for foreign companies who bring new and different product and service solutions to the Japanese market.
Debbie Howard is the Chairman of CarterJMRN K.K., a full-service qualitative and quantitative market research and strategic consulting firm headquartered in Tokyo, Japan. She has spent over 30 years helping clients to unmask the Japanese consumer.
As one of four Japanese societal macro trends monitored regularly by CarterJMRN (along with Women Power, the Changing World of Work, and Internationalization), Generational Dynamics impact consumer behavior across many age groups as attitudes continue to evolve in relation to lifestyle, including availability and use of personal and leisure time.