Longtime Japan observer, Jesper Koll, currently head of equity research at JPMorgan Japan, argues Japan is in a “demographic sweet spot.” In a recent interview with Bloomberg (see video clip queued from 2:35 mark*) he made some key points rarely shared when Japan’s demographics are discussed, one being that wage deflation is ending. His focus was more on the opportunities surrounding taking care of Japan’s elderly and the likelihood that they will spend their trillions of yen on comfort. A point often forgotten by those outside of Japan is that the aging society means higher-paid older workers are retiring, easing compensation expenses for companies. Importantly, this situation also allows companies to pay younger workers better, which in turn should allow for more, if not earlier, possibilities of family formation.
I don’t agree that Japan should hike its sales tax despite its deficit (discussed in the first portion of the video). With all the net cash on balance sheets and positive earnings across Japanese companies, I’d argue there are more clever ways to enhance tax revenues and consumer spending rather than sticking consumers with a tax hike. If you’re interested in what this means for investing in Japan, I cover demographics, individual’s composition of net assets and how little is actually in equities, and much more in my book, Investing in Japan.
*Ignore strike-through text of link. It was active at time of posting.