Mikayo Taguchi loves splurging on her grandkids and children, whether for clothes or sporting goods or family outings. In Japan, that generosity matters -- boosting demand by tens of billions of dollars each year.
"Those who are grandmothers and grandfathers often say that you can’t look after your grandchildren unless you have money,” said Taguchi, 60, a resident of Miyazaki prefecture in western Japan.
The savings-rich elderly spend about 9.7 trillion yen ($87 billion) a year on their offspring, including adult children who have struggled with lower wages during two decades of sputtering economic growth, according to Hiromichi Shirakawa, a chief Japan economist at Credit Suisse Group. He estimated such spending last year accounted for about a third of the modest growth in total consumption.
That wasn’t how it was supposed to be in the fifth year of Prime Minister Shinzo Abe’s economic revival plan for sustainable growth fueled by strong wage gains. While Japan did enjoy the longest economic expansion in about three decades through the end of 2017, pay and consumption are rising only modestly, frustrating the Bank of Japan’s efforts to hit 2 per cent inflation.
Since the second half of 2016, when consumption began recovering, growth in spending was strongest for elderly households with high savings levels -- at least 30 million yen, Shirakawa and other Credit Suisse economi...