Arthritic Nation
By Peter Landers in Kiryu, Japan
Far East Economic Review
July 16, 1998The greying of Japan isn't a worry for the next millennium: It's already a problem. Conservative habits of an ageing population have a lot to do with why Japan can't seem to restructure its economy.
No doubt about it, says Shigeo Shimizu, this recession is bad. The neighbourhood near the Kiryu River where he makes black sashes for funeral kimonos used to be lined with textile factories; now they're mostly gone, and people who are still hanging on say orders are sharply down since last year.
Yet when parliamentary elections roll around on July 12, the 66-year-old Shimizu will be voting, as always, for a candidate from the ruling Liberal Democratic Party. He doesn't suppose the LDP will do much to make the bad times better, but the opposition candidates make him uneasy. "I can't vote for someone I don't know. At least I know these guys," he says.
As Japan ages, older voters like Shimizu--wary of risk, averse to changing old habits--have come to make all the difference. In the voting for half of parliament's upper house, the LDP is certain to win more seats than any other single party. It may even capture a majority of the 126 at stake. If past trends hold up, fewer than one in four Japanese in their 20s will vote. But more than two-thirds of those over 65 will--and overwhelmingly they'll vote for the conservative ruling party. In the 1995 upper-house election, those aged 55 and over accounted for an estimated 48% of all voters.
Elections show how the ageing of Japan, once seen as a trend whose impact was still a few decades away, is already making itself felt. With a solid base of conservative supporters, politicians have no impetus to force through the painful restructuring that's needed to revive Japan's economy--seen as vital to the recovery of Asia. And the frugal spending habits of an ageing population do little to stimulate demand.
Japan isn't an old country, yet. Only 16% of its people are over age 65, a proportion comparable to most European nations. But that's changing. The average Japanese woman lives 83.6 years, and the average man 77. Meanwhile, women are having fewer babies than ever. So by 2035 or so, the government estimates that more than 30% of Japanese will be 65 years or older.
But forecasts like those have prompted even middle-aged Japanese to turn conservative politically, and to try to hang on to their financial assets.
Concerned that state-supported pensions will dry up, consumers are clinging to their savings like never before and as a result deepening Japan's recession. And young people feel increasingly left out of a society that doesn't seem to involve them.
Places like Kiryu, a textile manufacturing town of 120,000 people 100 kilometres north of Tokyo, give a sense of things to come. About one in five people in town is over 65, partly because competition from South Korea and China has hurt the textile industry and sent young people seeking jobs elsewhere. The town's commercial district is filled with clinics, dentists' offices, and companies offering services for the home-bound elderly.Night-time is quiet, with only a handful of teenagers hanging out in the main shopping area.
In elections, it's elderly activists who ensure victory. At the Kiryu office of LDP candidate Hirofumi Nakasone--a son of former Prime Minister Yasuhiro Nakasone--35 activists gather one night, all but one or two over 60. They're organized block by block, and a sign exhorts them to "steamroller" their neighbourhoods and trade guilds with get-out-the-vote efforts.That kind of organization virtually assures Nakasone and the other LDP candidate of capturing the two seats open in Gumma Prefecture, which includes Kiryu. The economy is barely discussed; instead, the activists in Kiryu respond to ties of obligation. Many of the prefecture's legislators are on Nakasone's side, says Katsumi Okabe, who owns a dyeing factory. As a result, he tells the group, "We should try to preserve their face by making absolutely sure to get more votes than the other camp."
The scene in Kiryu is repeated in LDP candidates' campaigns nationwide--and that's significant long after the election.
Take Hiroshi Kobayashi, 65, who runs a tiny sash factory with his wife in Kiryu. "We've never had a recession as bad as this," says Kobayashi. Yet he smiles through the bad times, saying he never expected to be rich, anyway.
"As long as we have enough to eat, why be gloomy when you can be cheerful?" he asks.
Radical steps such as deregulation or encouraging corporate restructuring don't appeal to elderly voters since the benefits, as with U.S. deregulation in the late 1970s and 1980s, may take a decade or more to appear. "Older people don't think about what youth needs when voting," says Yumiko Ehara, an associate professor of sociology at Tokyo Metropolitan University. "They vote to protect their own interests and try to keep the status quo."
As Japan's deepening recession over the last year shows, this defensive mentality has spread to millions of middle-aged consumers--who already ranked among the world's biggest savers and have begun preparing for the future by saving more than ever. Household spending, which accounts for 60% of Japan's gross domestic product, was down in May compared with a year earlier and for the seventh month in a row.
On April 1, 1997, the government increased the national sales tax to 5% from 3%. And on September 1 it doubled the percentage of medical costs that salaried workers must pay out of their own pockets to 20%.
Even before 1997, some experts had warned that Japan would someday need a sales tax of 15%-20% to support its elderly population, and a government panel had warned in November 1996 that Japan's system of universal health care might collapse in the future. The modest steps of 1997 had the effect of persuading Japanese that these dire predictions were likely to come true.
Isamu Ueda, 39, a member of parliament's lower house from the opposition New Peace Party, says the biggest worry of his constituents in a Tokyo suburb isn't the current economic mess: "The largest concern is for the future . . . A lot of people are pessimistic that they won't get their full pension."
It's not an unfounded fear. Under current projections, 30%-35% of national income would have to go toward pensions, medical care and other welfare costs by 2025, up from around 19%. Low interest rates in recent years have worsened the financial position of the state pension system, which provides basic benefits for all. Many private companies, which supplement government payouts, also suffer from vastly underfunded pension plans. Electronics maker Hitachi said in April it will inject ¥180 billion ($1.3 billion) into its pension plan over the next five years to cover shortfalls, and it is also reducing benefits.
Cash-rich companies such as Hitachi can withstand such a blow, but workers at weaker companies fear they won't get the pension money that they're owed. That gives Japanese all the more reason to save as much as possible now just in case.
For their part, young people tend to tune out of the ageing debate altogether. That's not all bad: Spending by teenagers and people in their 20s represents one of the few supports for the economy. But their ambivalence slows political change.
Shio Yamazaki, the main opposition candidate in the district that includes Kiryu, says young people won't listen to politicians' speeches. "For older people, it's part of their life to vote. They don't ask questions. For the younger generation, voting isn't part of their lifestyle," says Yamazaki after a midday campaign speech outside a supermarket, during which not a single person stops to listen.
But Japan need not be doomed to a permanent recession. Consumer sentiment is notoriously fickle; a series of lucky breaks such as a recent heat wave, which has sent sales of air conditioners surging, might be enough to put Japanese in a buying mood. More deregulatory steps, such as allowing larger housing, could create new demand for durable goods.
Nevertheless, over the longer term, Japan needs leaders who can lay out a persuasive vision of the future, say commentators. With government encouragement, companies could raise their retirement ages and institute more flexible wage scales to make use of older workers' experience without hurting the bottom line. Also, raising consumption taxes and reducing the top income-tax rate from the current 65% would ease the relative burden on salaried workers and perhaps even increase total tax revenue by encouraging people to work more. Pensions could be scaled back for wealthier people without erasing the basic guarantees for a secure old age.
At the moment, however, far-sighted leadership is in short supply. LDP leaders tend instead to pander to older people on fixed incomes by calling for higher interest rates, a move economists say would be disastrous. "The public is ready to take in the real story and choose between the true alternatives," says Ueda, the opposition MP. "But politicians aren't bold enough to take the chance."
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Added July 20, 1998
