One of the biggest socioeconomic issues in the developed world right now is the widening income gap between the rich and the not-rich. In the U.S., the gap has become so big that the so-called 1 percent have adopted a siege mentality by isolating themselves from the rest of society, in either gated communities or urban condominium towers.
In Japan the rich are different, or at least, they seem to be. It’s often said that in Japan you may live right next door to a millionaire and not know it because his house looks just like yours.
The idea that wealthy people in Japan don’t show off their wealth is perhaps grounded in the Japanese stereotype of not wanting to stand out from the crowd. Still, with Japan’s stock market on a general roll for the last several years, the Japanese media has started talking about the “superrich” (chō-fuyūsō).
But how do you define a rich person in Japan? According to Atsushi Miura, who last year published a book titled “The New Rich,” the financial industry considers a person to be wealthy if their yearly income is over ¥30 million and they have assets of at least ¥100 million. About 1.3 million Japanese people have assets in that range, or 1 percent of the population. Another way to define the rich is that they tend to live off the interest and other capital gains derived from their assets, without ever touching those assets.
In his research, Miura found that Japan’s 1 percent does indeed tend to avoid ostentation. They don’t build mansions — we’re talking real mansions, not condos — and believe it unseemly to “throw one’s money around indiscriminately.” However, the Japanese rich will spend money on things they like and tend to favor the intangible. They’re more likely to patronize the arts and go to concerts than splurge on sports cars or expensive jewelry. They travel often and take cruises.
Miura has also found that the new Japanese rich are looking inward more: They buy Japanese stuff and travel domestically. They prefer expensive nihonshu to foreign wine, and Japanese artworks to Western ones. This is not simply a matter of taste. It is also an expression of civic responsibility. The new rich understand their place in society, and know that Japan needs their money. In a sense they take the “trickle-down” component of the theory of “Abenomics” to heart.
Nevertheless, rich people still try to avoid having their assets taxed, so if they can keep those assets overseas, they will, and it was only this year that the government finally mandated that people with foreign assets of over ¥50 million must report them.
Another characteristic of the new rich is that they are conscious of being rich, whereas traditionally rich people in Japan didn’t ponder their wealth. They took if for granted. That’s mainly because the new rich usually obtained their wealth through their own efforts or through some special skill or idea. Even people who inherit wealth or are in line to inherit wealth tend to get jobs and work their whole lives. There’s no concept of the “idle rich” in Japan.
In fact, what the children of rich people inherit and what keeps them rich is not so much money itself but the tools for making money: the best education money can buy and a fundamental understanding of how money works, neither of which the average person may be able to access so readily.
This idea was explored more fully on a recent segment of the TV Tokyo financial program “Nikkei Plus 10,” in which an employee from Nomura Research named Junji Hatoriya talked about how the new rich maintain their wealth while the vast Japanese middle class continues to just get by. Hatoriya identified three important segments of upper-income earners who “will become the new rich in the future.”
The first segment is composed of the children of rich parents. Miura’s own research in this area dovetails almost perfectly with Nomura’s: The children of the rich are not necessarily inheriting their wealth or expecting to inherit it. Instead, they are learning from their parents’ example and embarking on their own investment strategies. Only 8 percent of the general population has any “experience in investing,” while 24 percent of children of people with assets of over ¥100 million have such experience, and 52 percent have stock portfolios themselves.
Another segment is “power couples,” which Nomura defines as married couples in which both partners work and bring home a combined income of at least ¥10 million a year. Forty-four percent of power couples have investment experience, while only 15 percent of all double-income households do. More significantly, power couples usually employ financial planners and other professionals who advise them on how to manage their money, because they usually don’t have time to do it themselves. They spend their money freely, but mainly on things that will give them more free time, such as housekeeping services and expensive private day care.
The last segment is the one that really intrigues Nomura: “digital seniors.” These are retired people who are tech-savvy and spend a good deal of their time online. They understand how the world works and educate themselves about investments through the Internet. Which isn’t to say they buy and sell stocks online. They still do that the old-fashioned way — through brokers — but since they have deep knowledge about financial trends, they are able to talk seriously to these professionals and make sound decisions.
Nomura estimates that there about 8.8 million digital seniors, whose average assets amount to about ¥26 million, while the average assets of all seniors is about ¥14 million. It literally pays to know how to use your computer.
Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month. For related online content, see blog.japantimes.co.jp/yen-for-living.
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