On the face of it a shrinking and ageing society increasingly worried about making ends meet hardly represents a prime market for business profits.This content was published on October 14, 2009 - 08:07
But Japan's over-65 "silver" consumers – who will grow from 20 to 40 per cent of the population by 2055 – could present a bonanza for Swiss and other foreign firms that learn to cater to their needs.
Experts predict this segment could become avid consumers of a wide range of goods and services, from electronics, financial advice, healthcare, cosmetics, pharmaceuticals and dietary products.
"The 1940s baby boomer generation is starting to go into retirement now and they are on the whole quite well to do," Florian Coulmas, director of the German Institute for Japanese Studies in Tokyo, told swissinfo.ch.
"The silver market has money to spend and will spend it. There is a growth industry in all sorts of products that are being tailored to senior consumers."
Japanese firms have been tuned into this development for a number of years. A host of devices – from easy-to- use mobile phones to cars that brake automatically near obstacles – have been, or are being, designed.
Healthcare is a rapidly expanding market for an ageing society. A leap in Swiss exports to Japan in the first half of this year was driven by pharmaceuticals, and more particularly, Roche's flu medicine Tamiflu.
Novartis has recently started clinical trials in Japan for a swine flu vaccine and has launched several new products in the market this year, including Lucentis that treats a degenerative eye condition prevalent in the elderly.
Nestlé, the world's largest food manufacturer, opened its first Japan-based research centre in Tokyo in May. The unit will research health and nutrition topics, focusing on mobility and cognitive performance among the elderly.
Swiss Economics Minister Doris Leuthard told swissinfo.ch that Japan was likely to be one of the fastest countries to recover from the global recession. She hopes that a recent free trade agreement between the two countries will boost trade further.
"The Japanese are very health conscious and our pharmaceutical, food and nutrition industries are well placed here," she said.
But Japan is still wallowing in the economic doldrums and could lose its status as the world's second-largest economy to China as early as next year. The new government, which last month broke the Liberal Democratic Party's 54-year stranglehold on power, is grappling with serious structural challenges.
The population is expected to decline by 30 per cent (to 90 million) by the middle of the century thanks to a low birth rate, while the over-65 segment will make up four out of every ten citizens.
New Japanese Prime Minister Yukio Hatoyama from the Democratic Party of Japan has targeted a revival of the domestic market in a bid to kick-start the economy. But some corporate leaders, including the country's largest business umbrella group Keidanren, remain sceptical.
"The new government has switched policy from growth to wealth redistribution to close the gap between rich and poor," Tetsuro Miyachi, a senior portfolio manager at global asset management group Franklin Templeton Investments told swissinfo.ch.
"This is bad for equity markets because it does not help corporate earnings. Consumer spending will gradually fall and next year China could overtake Japan as the world's second-largest economy."
Matthew Allen in Tokyo, swissinfo.ch
Japan is currently the world's second-largest economy, behind the US, with a gross domestic product (GDP) of nearly $5 trillion (SFr5.13 trillion). However, this is expected to fall by 6% in 2009.
The economy is underpinned by exports, but the number of goods and services being sent to other countries fell by 40% in December last year. Exports have not been helped by the rapid appreciation of the Yen.
Trade with Switzerland has increased steadily in the past few years. Swiss exports grew 4.8% last year, totalling more than SFr7 billion ($6.56 billion), while Japanese goods to the tune of SFr4.1 billion made the return trip (up 18.2%).
However, while Swiss exports to Japan continued to increase this year, Japanese exports to Switzerland fell markedly.
Japan is the most indebted country in the world with gross government debt running at 217% of GDP.
In compliance with the JTI standards