Elderly Japanese, among the world’s richest retirees, are flocking to inheritance advisers, tackling historical taboos on discussing death and providing a rare avenue of growth for the country’s brokerages and banks.
Trillions of US dollars parked in savings accounts are set to be released in the coming years as Japan’s death rate climbs and new, more onerous inheritance tax rules kick in.
The shift is attracting investment from companies such as Nomura Holdings Inc, Daiwa Securities Group and Mizuho Financial Group which are ramping up offerings of inheritance-related services and products, hoping to lock in a new generation of customers.
“Until now, Nomura has dealt with its customers individually. When they pass away, that connection ends. We want their children to become customers,” said Naoshi Sakai, who oversees trusts at Nomura Securities Co, a subsidiary of Nomura Holdings.
“Business chances for domestic sales will get smaller as the population shrinks, and we have to avoid that. Inheritance is one business that will certainly grow in the next 20 years,” Sakai said.
More than US$470 billion — nearly Norway’s GDP — in financial assets is passed on annually in Japan, Nomura Institute of Capital Markets Research estimates. That figure, which includes property, is set to grow to US$660 billion a year by 2030. Cumulatively, more than US$4.7 trillion, equivalent to Japan’s GDP, will be passed down by 2030.
As families plan to deal with this flood of funds, discussion of mortality is becoming more common. Interest in shukatsu — literally preparing for the end — has boosted death-related businesses, from try-before-you-die coffins to funeral planning.
“My sons are starting to give their opinion on inheritance, and I’m interested,” 84-year-old Susumu Yokoyama said after a recent Nomura seminar on estate planning in Tokyo. “I’m thinking about what to do.”
Due to a rock-bottom birth rate, Japan’s population is shrinking and ageing fast. The government predicts the population will fall to about 80 million by 2050 from 127 million last year. By then 40 percent of people would be over 65, compared with 27 percent last year.
They are also expiring faster than ever: The national death rate spiked to 10.4 deaths per 1,000 people last year from 9.5 in 2010.
However, they are wealthy. Those over 60 years old own more than half of the country’s US$14 trillion in personal financial assets, according to the Bank of Japan.
Japan already has among the highest inheritance tax in the world with a top rate of 55 percent, and changes introduced last year lowered the threshold for paying the tax to US$280,000 from US$471,000.
In the US, the threshold is US$5.5 million with a top rate of 40 percent, while numerous countries including China and 15 Organisation of Economic Co-operation and Development nations have no inheritance tax.
Trust banks, such as Sumitomo Mitsui Trust Bank Ltd, traditionally the main providers of inheritance services, are facing a push from banks such as Mizuho, which are seeking to bolster their asset management businesses as negative interest rates sap returns and demand for loans remains tepid.
However, even as the sector grows, death remains the elephant in the room for those selling the products. Marketing materials use phrases such as “preparing for the future” or “memories for your family,” and sellers tread carefully when meeting customers.
“We discuss inheritance not in terms of ‘what will you do when you die?’ but rather in terms of how you can leave assets to your family,” said Takayuki Konno, a marketing manager at Mizuho. “It’s a practical problem that people want to solve.”
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