Japan's silver savers will bear the brunt of "Abenomics"

Tue Mar 12, 2013 5:50pm EDT
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By Stanley White and Lisa Twaronite

TOKYO (Reuters) - Kiyoko Kinugasa and her husband Minekatsu spent the last 49 years running a small, neighborhood snack shop in central Tokyo.

"We're trying to save more for retirement, but it isn't easy," said Kinugasa, 74, as her husband, 76, dabbed sweet azuki-bean paste into circles of batter on a hot iron grill.

"The future is uncertain."

A prime minister who was in grade school when the Kinugasas started working is now threatening to put their retirement goal even further out of reach.

With his nominee to head the central bank facing questions this week in parliament, 58-year-old Japanese Prime Minister Shinzo Abe is inching closer to implementing his plan to reverse deflation and revive growth. It may be just what Japan's economy needs, but it will come at the expense of Japan's fastest-growing demographic group: its so-called "silver savers," elderly Japanese like the Kinugasas who helped build Japan into an export-driven industrial powerhouse in the 1970s and 1980s, and who are preparing to live off their savings and pensions.

In the 20 years since Japan's economic bubble burst, the economy has stagnated, but thanks to low-grade deflation the elderly's purchasing power has steadily grown. Abe's plan to revive inflation stands to undo that, taxing the elderly -- figuratively and literally -- to finance a bet on recovery.

The fear is that Japan's silver savers will revolt. If the prospect of higher inflation and taxes convinces them to start liquidating their roughly $7.4 trillion in assets, some analysts and economists warn it could touch off a fiscal crisis that up-ends "Abenomics" before it gets a chance to work.

"Older people will whittle down their savings," said Koichi Haji, chief economist at NLI Research Institute. "That would make it more difficult for the government to sell new debt."   Continued...

Seventy-six-year-old Minekatsu Kinugasa (R) and his seventy-four-year old wife Kiyoko make "imagawayaki' buns with sweet fillings at their shop in central Tokyo's Azabu-juban district, February 8, 2013. REUTERS/Issei Kato