A significant aging problem in the nation's business sector is becoming apparent, with the average age of Japanese company chief executives having increased for 33 consecutive years as of last year, according to recently released research. This trend suggests challenges lie ahead in ensuring a smooth business succession to the next generation of leaders.
As of December last year, the average age of such leaders stood at 60.5 years old, up by 0.1 point from the previous year, Tokyo-based research firm Teikoku Databank said Friday.
Since Teikoku Databank began tracking the issue in 1990, the figure has continuously increased. In 1990, the average age was 54. The research was based on the firm's database of about 1.47 million domestic companies.
The research also showed that last year, only 3.8% of company leadership passed the torch to new leaders, the level that has remained relatively steady at around 3% for 14 straight years. The average age of new chiefs was 52.5.
In addition, the research shows that presidents of listed firms were age 58.6 on average.
“The research result indicates that it is necessary to become more vigilant about the risk of aging business chiefs,” Teikoku Databank said in a release.
The research firm said that the number of bankruptcies related to difficulties in finding successors stood at a record high of 586 cases last fiscal year that ended in March, a sharp rise from 487 in fiscal 2022. It added that about 40% of such cases involved illnesses or age-related deaths.
“If the aging issue continues, companies are more likely to face unexpected situations. In order to smoothly succeed the business, preparation and planning need to be coordinated well in advance.”
Although creating new startups from a young age is becoming a more popular career path in Japan, only 3.1% of business chiefs were under 40 years old with those under 30 standing at just 0.2%.
Developing business succession plans to smoothly transition leadership to the next generation has posed a significant challenge in the Japanese business world, particularly for small- and mid-sized firms.
Given that approximately 70% of Japanese workers are employed by such firms, the economic repercussions of these companies going bankrupt due to succession issues could be significant.
The government has enhanced support for aging business owners to transition to the next generation of leaders. This includes implementing moratorium periods or exemptions for gift and inheritance taxes for successors, as well as establishing counseling centers.
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