Business / Financial Markets

Japan's Financial Services Agency calls for financial products that focus on longevity risk

JIJI

The Financial Services Agency has released a draft report calling for financial products that focus on longevity risk, or when people’s funds for living expenses run short due to a rise in longevity.

The draft includes plans for the agency to urge financial institutions to expand their ranges of financial products and services that respond to an aging society.

It also noted the need for services that preserve assets for when people’s cognitive functions deteriorate.

The document was presented to a task force under the Financial System Council, which advises the prime minister, on Wednesday.

The content of the draft will be explained at a meeting of Group of 20 finance ministers and central bank chiefs set to be held in the city of Fukuoka in June.

The draft splits asset formation and other matters into three stages — working period, just before and after retirement, and late life — and suggested necessary products and services.

For the late life stage, the draft stressed that financial institutions should try to refrain from offering people high-risk, complicated products.

It also stressed the need to create an environment to help people manage their assets even after they have lost or seen a decline in their cognitive abilities or judgment.

The FSA said that a household composed of an unemployed elderly couple is currently facing a deficit of some ¥50,000 every month on average.

If such a situation were to continue for 30 years, households affected would need to withdraw around ¥20 million in assets, it estimated.

As the average value of financial assets held by a household of a couple aged 65 stands at ¥22.52 million, the agency said that such people may face a shortage of funds for living expenses if they also need to pay for nursing care and other costs.