Japan's Stock Market Also Aging, 80% of Shareholders Are Over 60... MZ Generation All Invest in the US

Despite Unlimited Tax-Exempt Benefits, Japanese Stocks Are Ignored
Half of Japanese 2030s Respond "Bought Overseas Stocks"

As Japan faces major social issues such as low birth rates and an aging population, concerns have been raised that the stock market is also aging significantly, leading to a disruption in the proper circulation of wealth. Over 80% of shareholders in the Japanese stock market are aged 60 or older, while despite various government policies encouraging investment, Japan's MZ generation primarily shows interest only in investing in overseas stocks, particularly in the United States.

On the 3rd, Nihon Keizai Shimbun (Nikkei) reported that a survey conducted by the polling agency Macromill in March targeting 1,300 individual investors aged 20 to 70 found that 36% of respondents said they had increased their overseas stock investments compared to a year ago. Among them, the proportion was notably high among those in their 20s at 52% and those in their 30s at 44%.

Regarding the reasons for investing in overseas stocks, 46% of respondents in their 20s and 54% in their 30s answered that "foreign companies have higher expected returns than Japanese companies," ranking first in both age groups. In contrast, among those in their 50s and 60s, 44% and 40% respectively said they invested overseas stocks "to diversify their assets," showing a clear difference from the younger 20s and 30s who are just beginning to build their assets.

[Image source=AP Yonhap News]

As for the appeal of overseas stocks, 44% answered that it was "because the (market's) economic growth potential is large," ranking first, followed by 41% who said it was "because of high profit and dividend growth rates." Similar to South Korea, the overseas stocks that attract the interest of Japan's younger generation are U.S. stocks. Nikkei reported through anonymous interviews with individual investors buying U.S. stocks that "U.S. stocks allow for small, incremental investments in promising growth stocks on a per-share basis. There are also many stocks closely related to daily life, such as Apple."

Nikkei analyzed that the reason young people avoid buying Japanese stocks is due to anxiety about Japan's future. When asked "What are the problems with holding Japanese stocks?" 52% answered "population decline and low birthrate/aging," and 38% answered "fiscal deterioration and tax increases," indicating high awareness of Japan's macroeconomic environment.

This ultimately reveals that the government's policies aimed at revitalizing the domestic market have not been effective. The Kishida administration has launched a "Plan to Double Asset Income" to promote individual investment and plans to significantly improve the Nippon Individual Savings Account (NISA), a tax-exempt small investment system similar to South Korea's Individual Savings Account (ISA). NISA is characterized by not taxing profits generated from investments.

Additionally, from next year, the Japanese government will significantly raise the annual contribution limits for NISA from 400,000 yen (approximately 3.92 million KRW) to 1.2 million yen (approximately 11.78 million KRW) for installment-type accounts, and from 1.2 million yen to 2.4 million yen (approximately 23.57 million KRW) for general accounts. The tax-exempt period has also been extended indefinitely. However, despite these policies, the younger generation is moving away from the Japanese domestic stock market toward the U.S. stock market.

[Image source=Reuters Yonhap News]

The reason the Japanese government is trying so hard to attract young people to the stock market is to revive the economy after a long period of stagnation. Wealth needs to be transferred to the younger generation to stimulate consumption and economic activity, but wealth is excessively concentrated among the elderly.

According to data from the Japanese Tax Research Association in 2019, financial assets held by those aged 60 and over account for 65% of the total across all age groups. Nikkei stated that applying this to the total household financial assets balance of 2,000 trillion yen (approximately 1,968.5 trillion KRW), assets held by those aged 60 and over amount to 1,300 trillion yen (approximately 1,279.5 trillion KRW).

Along with the aging population issue, shareholder aging is also accelerating. According to Nikkei, as the elderly population increases, the proportion of shareholders aged 70 and over surged from 15% in 1989 to 41% in 2019. In terms of trading volume by age group at Matsui Securities, those in their 70s accounted for 35%, ranking first.

[Image source=Reuters Yonhap News]

A clear example illustrating this is the Japanese telecommunications company NTT. When NTT was listed in 1987, it had nearly 700,000 shareholders in their 30s and 40s, but now, over 30 years later, more than 80% of shareholders are aged 60 or older. This means the generation that bought the stock back then has simply aged while holding onto it.

This aging of shareholders is also pointed out as a problem that makes wealth transfer impossible. Typically, elderly shareholders tend to sell stocks before inheritance to buy real estate, so wealth is not passed on to the younger generation.

However, there is analysis that changes are expected as Warren Buffett, the global "investment genius" and chairman of Berkshire Hathaway, has expressed consideration of additional investments in Japanese stocks, and the Tokyo Stock Exchange has taken measures to improve stock prices. At the end of March, the Tokyo Stock Exchange announced and required listed companies with a price-to-book ratio (PBR) below 1 to implement improvement measures.

Nikkei analyzed that these changes show signs that Japanese stocks may escape their "perennial undervaluation." However, it added, "The key issue is whether the investment reserves supplying funds can be attracted to Japanese stocks. The responsibility that market reform must bear is heavy."

This content was produced with the assistance of AI translation services.