Graying Japan braces for boomer retirement wave

The way Masahiro Shimizu sees it, he and Japan’s other baby boomers built the country into an economic powerhouse -- and now it’s time to enjoy the fruits of their labor.

Shimizu will leave his job in the department store business next year, having become one of some 5.4 million Japanese boomer employees who will reach the standard retirement age of 60 over the next three years.

The retirement of the boomers, which kicked off in April with the start of the fiscal year, is a signature event for Japan, symbolizing a rapidly aging society, a looming fiscal crunch and the emergence of a roaring “gray economy” fueled by free-spending retirees.

The impact of mass retirements is expected to be limited at first, but the debate -- which to some extent mirrors the one in the United States over Social Security and longevity -- is in full swing, and the retirement age is already edging upward.

Shimizu, 59 and married, could have stayed on until 65, in fact the government would be delighted if more boomers made that choice and softened the social security burden. But Shimizu isn’t interested.

“Up till now, it’s been all about the family,” he said while visiting an exhibit of a retirement village planned in the resort town of Ito, south of Tokyo. “Now my son and daughter are on their own ... so I want to be independent and do what I want.”

Born between 1947 and 1949, before abortion laws were loosened, the estimated 7 million baby boomers grew up as Japan rebuilt itself after World War II, and moved into the job market as the economy took off. They hit their prime in the ‘80s -- just as the economy peaked.

Now they are entering their golden years as Japan confronts the potentially dire social and economic consequences of societal aging and moves to overhaul employment and pension plans.

Last year, the government started requiring companies to gradually raise the retirement age to 65 or find other work for aging employees. The qualifying age for pension benefits will also slowly increase from 60 to 65 to keep the system solvent.

Already, more than 20% of the population is 65 or older, and that will rise to more than 30% by 2050. Boomers account for an estimated 8.6% of the workforce -- and their sudden disappearance from Japan’s offices and factories would be a blow to the economy at a time when the overall labor force is shrinking.

“This has spurred concern about the loss of laborers, but also the loss of a highly skilled, highly capable group of workers,” said Atsushi Seike, a Keio University economist and advisor to the government on social security and aging issues.

Planners expect more than half of the boomers to stay productive well past 60, and the government won’t hazard a guess as to how many will retire this year. But Nippon Life Insurance Co. estimates some 1.12 million will leave the workforce over the next three years. Though that’s less than a quarter of the over-60 workers, Japan’s boomer-retirement wave is coming harder and faster than America’s.

Japan’s baby boom started later than America’s and lasted three years, compared with 19 in the U.S., says John Rother, policy director at AARP.

“The U.S. has a healthier economy, a growing population aided by immigration, and retirement institutions like Social Security that although now are under pressure, could be strengthened by small modifications,” he said in an interview. “That is not the case in Japan.”

But Japan has an advantage: It has a long-term care program and “everyone has a pension,” Rother said. “What’s obvious is that we’re going to have to spend more on healthcare.”

All sorts of new products and services await the flood of Japan’s wealthiest-ever generation into the leisure, real estate and travel markets.

Boomers hold an estimated 10% of total personal financial assets in Japan, according to a 2004 study by Dai-ichi Life Research Institute. When that group is expanded to include everyone 50 and older in Japan, encompassing its substantial elderly population, Hartford Financial Services Group of the U.S. estimates boomers hold an astounding 80% of those personal assets.

Developers are scrambling to lure retirees to planned communities where they can enjoy the good life and spend their nest eggs. Companies in Okinawa and Hokkaido, Japan’s southernmost and northernmost major islands, offer retired couples a free three-month trial stay.

Shimizu and about 20 others joined a two-day trip to such a planned retirement village on the Izu Peninsula about two hours outside of Tokyo.

The $25-million village on wooded land overlooking Sagami Bay will house about 1,000 people, 60% retirees, said Sachihiko Kawamata, president of the Tsukasa Group developer.

Kawamata, 59, says he has plans to attract younger workers, single mothers and other young people to the project so it doesn’t feel like a nursing home.

He wants to re-create the homely, intimate Japan that retirees remember from their youth. “When we were kids, children and older people lived together, and when the kids misbehaved, their elders would correct them,” he said. “Now, you don’t know who your neighbors are.”

Many boomers say they’ll go on working in retirement. Shimizu wants to set up a small business. Takeshi Sakamoto, 60, hopes to open a noodle shop in the village.

“Our generation was the kind that could do anything,” Sakamoto said before heading to a hot-spring bath with other graying tour participants. “In the old days, if you retired you could just relax. But in this economy, you can’t just quit doing things.”

AP researcher Carley Petesch in New York contributed to this report.