Japan's pension system, vulnerable to demographic fluctuations since June 25, 2019! [From Tomoaki Sugimura's email magazine]
From the investment newsletter “Sugimura Tomo Investment Salon” by Tomoe Sugimura, provided by GogoJungle, here is a small excerpt from what was distributed today.
The Financial Council’s recommendations are stirring controversy (in the 100-year life era, living only on public pensions is impossible → after retirement, 20,000,000 yen is needed over 30 years). However, this is “common sense.” It’s not something to cause political strife. Here the fundamental issues should be discussed.
Because it’s true, isn’t it? I think many Japanese people believe that Japan’s pension system will eventually run out of funds and require対応. Japan’s universal health insurance system started in 1961, when the number of people aged 65 and over was 5 million and the average life expectancy was 67. What about now?
Remarkably, the number of people aged 65 and over has surpassed 30 million, and we are in the 100-year life era. Among women, one in five is said to live past 100. Japan’s defined-benefit pension is severely weakened by demographic changes (i.e., low birthrate and aging population). It also assumed high growth, population increase, and inflation. It does not anticipate the current economic environment. In short, the number of beneficiaries is swelling while the number who support it continues to shrink. Also, the monthly contribution to the National Pension by self-employed and freelance workers is only 16,000 yen, while the take-home pay is only 65,000 yen per month. How can people live on this?
The National Pension is built on three-generation cohabitation (the Chibi Maruko-chan family style). Single-person households were not supposed to exist in the first place. Yet, single-person households are rapidly increasing and now exceed standard households. Anyway, pensions alone cannot ensure a “dignified old age.” Even salaried workers cannot be reassured. In the future, there will be reductions in benefits and later retirement ages (to work until 70), and other harsh realities lie ahead.
That is precisely why I advocate building your own pension centered on stock investing. Japanese people somehow hate risk to an extreme and love deposits. Despite abnormally ultra-low interest rates, 51–52% of personal financial assets are in cash/deposits. Isn’t this abnormal?
The normal deposit interest rate at megabanks is 0.001%. For 1,000,000 yen, the net interest after one year is “8 yen.” This is at the level of “garbage in the passbook.” For example, if you withdraw your deposit and buy Mitsubishi UFJ Financial Group (8306) stock with 1,000,000 yen... The dividend for fiscal year 2020 is planned at 25 yen (12.5 yen interim). With 1,000,000 yen you can buy 2,000 shares. The annual dividend would be net 46,000 yen.
The difference is obvious. After all, “8 yen” versus “46,000 yen.” Isn’t this what the Financial Council wanted to convey? Well, this is stock investment. Visionary Holdings (9263) will perform a 10-for-1 reverse stock split at the end of October, and NEW ART HOLDINGS (7638) will perform a 20-for-1 stock split at the end of October. The market price is around 38–39 yen, 47–48 yen, which are dangerous levels, but by November it will be around 380–390 yen and 840–860 yen for ordinary companies (held shares will decrease).
“Sugimura Tomo Investment Salon” (Tomoe Sugimura)Quoted from.
Low interest rates make it all the more important to create your own pension through investment, says Sugimura. It seems important to take on a certain level of risk and strive for profits in order to spend a secure old age. (Editorial Department)
