Japan’s Changing Consumer in 2017

Cautious optimism in an increasingly uncertainenvironment
5th April, 2017

TODAY’S AGENDA
Review the Japan opportunity
Current economic sentiment
Demographic opportunities
US-Japan political sentiment2

Pleased to meet you!

Debbie Howard
Chairman
Debbie has lived and worked inJapan for almost 32 years, andfounded JMRN in 1989.
Debbie is a specialist in translating
qualitative research into clear
strategic direction for international
clients, and over her career has
worked with most major brands
that have entered Japan.
She served as President of theAmerican Chamber of Commercein Japan (ACCJ) in 2004 and 2005,Chairman in 2006 and 2007, andcontinues to serve as ACCJ
President Emeritus.

3

Dominic Carter
CEO
Dominic’s education and early
career were spent in Australia but
has lived and worked in Japan
since late nineties.
Dominic is a marketing insights
practitioner and entrepreneur who
has devoted his career to assisting
international clients succeed inJapan.
With a focus on strategic output,
Dominic is a specialist in market
entry, cultural adaptation,communications , branddevelopment, brand tracking,segmentation and bespoke
consumer research, both
qualitative and quantitative.

About CarterJMRN
Japan expertise, creative thinking, safe hands

Full-service
consumer

insights-driven
marketingconsultancy

Multicultural
team of analysts
and marketing
consultants

Long established

Experienceagency in Japan(since 1989)

markets

independent

Offices in Tokyo,

Osaka &Singapore with acore team of 40& field force of 50
staff

4covers
Japan & APAC

Offering a uniquebalance ofthinking &creativity

Everything you’ve read and heard about Japan’s lowgrowth economy is true, but there are huge
opportunities for growth oriented US businesses

5Japan is still HUGE

6

Japan’s regional economies: GDPs the size of other countries

7

Japan is big, and it may be old, but it is RICH

8

Japan’s high net worth individuals
A force in Asia

Number of Japan’s Fuyu-so = 2.7 million(those with financial assets of above US$1 million)
Japan’s Fuyu-so represents 52% of those with assets above
US$1 million in the Asia region (China: 18.9%).
Japan’s Fuyu-so owns combined financial assets of US$5.9trillion (37% of total assets owned by Asia’s Fuyu-so).

Source: Asia-Pacific Wealth Report 20159

American brands are often well thought ofPopular American brands in Japan – Top 10 (Carter Survey March 2017)

Microsoft

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 201710

Economic sentiment in Japan can be described as
cautiously optimistic11

Consumer confidence slowly recovering
Consumer Confidence Index(Two households or more person - Seasonally adjusted)
Consumer Confidence

60.0

Average
Consumers regaining theirconfidence (February, 2017) =43.1

50.040.0

30.0

Lehmanshock (2008)
Tohoku earthquake& tsunami (2011 ) =20.08%
to 0% .
e 5 = 37kix h 4)
Ta (20110.0

0.0
2000

12

Source: Cabinet Office – Government of Japan
http://www.esri.cao.go.jp/jp/stat/shouhi/times
eries/shouhi2.xls

2008

2016

Unemployment rate decreasing; heading towards historical lows
Monthly Unemployment rate in Japan (Jan. 1990 – Feb. 2017)
5.4%

6.0

5.0

Bubble
burst

4.0

3.0

LehmanShock2.0

2.8%

2.2%

1.0

Source: Statistics Bureau – Ministry of Internal Affairs andCommunications of Japan

13Jan-16

Sep-16

Sep-14May-15Jan-14May-13Jan-12

Sep-12

May-11

Jan-10

Sep-10

Sep-08May-09

Jan-08May-07

Jan-06

Sep-06

Sep-04

May-05Jan-04

May-03Jan-02

Sep-02

May-01

Jan-00

Sep-00

Sep-98May-99Jan-98May-97

Jan-96

Sep-96

Sep-94May-95Jan-94

Sep-92May-93Jan-92May-91Jan-90

Sep-90

0.0

Low unemployment is greatly assisted by a drop in
the population of working age men

1415
Jan-04

Unit = 10,000 people
Source: Statistics Bureau – Ministry of Internal Affairs andCommunications of Japan
Dec-16

Jul-16

Feb-16

Sep-15

Apr-15

Nov-14Jun-14Jan-14Aug-13Mar-13Oct-12

May-12

Dec-11

Jul-11

Feb-11

Sep-10

Apr-10

Nov-09Jun-09

Jan-09Aug-08Mar-08

Oct-07

May-07

Dec-06

Jul-06

Feb-06

Sep-05

Apr-05

Nov-04

Jun-04

Dec-16

Jul-16

Feb-16

Sep-15

Apr-15

Nov-14Jun-14Jan-14Aug-13Mar-13Oct-12

May-12

Dec-11

Jul-11

Feb-11

Sep-10

Apr-10

Nov-09Jun-09

Jan-09Aug-08Mar-08

Oct-07

May-07

Dec-06

Jul-06

Feb-06

Sep-05

Apr-05

Nov-04

Jun-04Jan-04Since the mid-2000s the number of male in the labor force has beendecreasing, whereas the number of women has been growing
Male Labor Force

3950

3900

3850

3800

3750

3700

3650

Female Labor force
2950

2900

2850

2800

2750

2700

2650

2600

Economic Sentiment –Looking forward to smaller, not necessarily lesser Japan

16

CarterJMRN Japan-US sentiment survey

Timingmid-March 2017

Area

Age

15-69

Population representative

MethodWeb, self-completion

Japan nationwide

Population representativeby region

GenderMales and females

Population representative

Negative sentiment outweighs positive on the state of theJapanese economy“How do you currently feel about the state of the Japanese economy?
Are you becoming…”
Strongly more positive

2Somewhat more positive

19% morepositive

17

Neutral47

Somewhat less positive

25
34% less positive

Strongly less positive

9020%

40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 2017
1860

The demand for labor is increasing and reaching historical
records – so negative sentiment is probably overdone
The job offers-to-applicant ratio has been steadily increasing after the Lehman
shock. The current level is similar to the pre-1990s bubble
Bubbleburst

Job offers -to-Applicant ratio

1.6
1.4
1.2
1
0.8
0.6
0.4

LehmanShock

0.2

1990/01
1990/09
1991/05
1992/01
1992/09
1993/05
1994/01
1994/09
1995/05
1996/01
1996/09
1997/05
1998/01
1998/09
1999/05
2000/01
2000/09
2001/05
2002/01
2002/09
2003/05
2004/01
2004/09
2005/05
2006/01
2006/09
2007/05
2008/01
2008/09
2009/05
2010/01
2010/092011/05
2012/01
2012/09
2013/05
2014/01
2014/09
2015/05
2016/01
2016/090

Source: Japan Macro Advisors - JMA

19

Despite weak sentiment towards the economy overall, 4 in 10
Japanese see themselves spending more in the next 5 years“Do you see yourself and your household spending more or less…?”
6A lot more

1126
28

Some more

Next year

Neutral43
9A little less
3A lot less
012

6
2040%

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 2017
2056

60

Next 2-5 years

Demographics: a tale of generations

21

Demographic distribution of Japan (March 2017, estimated)
100
95 - 99
90 - 9485 - 89
80 - 84
75 - 79
70 - 74‘Dankai’65 - 69
60 - 64
55 - 59
50 - 54
45 - 49‘Baby Dankai’40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 -90 -4-600-400-2000Female

Source: Statistics Bureau of Japan
March 2017

22200Male400600

The “Dankai Generation”
They are living longer, are healthier and have a revived
image of themselves23

What are these consumers like today?
Eikichi Yazawa – The New “face” of “Old” in Japan[Influential Japanese singer-songwriter, and important figure in
Japanese popular music]. . . exemplifies the current breed of seniors, who
are passionate about being young! They areinterested in “being healthy,” “enjoying sport andfashion” and NOT being seen as “senior”

24The so-called “Dankai Generation” of baby boomers, born from
1947-1949, is now getting past their mid 60s

Those people who were working hard having no time to consider purchasing what
they liked, traveling where they wanted, enjoying their hobbies or educating
themselves will be able to take time seriously for the benefit of themselves, with
their housing-loan completed and their children having become independent
They can finally decide to how to spend their own money . . . They are a huge
consumer group that do not want to just give up on life because they are getting
older or retired . . . They want to be active and live life25

And they have significant spending powerNot all seniors are retired: 76.5% of people continue working under some form
after reaching retirement age
In the 60-65 year old age bracket, 47% of males are still working, even in the 7074 year old age bracket, some 30% of Japanese males are still working to someextentAs an example of the affluence in the dankai generation, their average annual
household income is 7.35 million yen, compared with the average annual
household income of 5.6 million yen
Looking at the natural human life cycle, from their mid-fifties consumers raise theirconsumption levels considerably compared to their earlier years, and continue tospend at a much higher level throughout retirement“Senior households” possess greater financial assets than other generations since
they tend to have higher savings on-hand. Households headed by those aged 65
and older spent an average 1.3 million yen annually compared with 1.2 million for
all households
Spending by households headed by those above 60 years of age hit 101 trillion yen
between July and September 2013, or 44% of overall personal consumption
26

Source: Cabinet Office Study, 2012; Study, Hideo Kumano, chief economist at Dai-ichi Life Research InstituteThey are a different and demanding target group
Dankai and those that follow them are distinct from older generations in thatthey are more active, spend more on personal interests, and more liberal andopen to foreign brands
These seniors can be a challenging group to sell to because they have time on
their hands to be picky and thoroughly deliberate before making decisions
However, products that complement healthy living (e.g. functional foods),
provide added convenience (e.g. online grocery shopping and home delivery)
and allow them to live life to the fullest (i.e., travel) are doing wellEspecially people from age 65 onward spend significantly on medical care,home remodeling and travel, spurring innovation and consumption in those27

They are creating market demand for new products and services
at an unprecedented pace – examples
These companies already focus on the senior’s “youthful mind”
Daihatsu Motor, one of themajor car manufacturers

Aeon, one of the major retailcompanies

Re-launched “COPEN,” currently
very popular among people who
retired and have some money
and time. Moreover, HONDA will
release “S660,” targeting seniors
familiar with “S600” and “S800”,
which were famous in 1960s

Introduced the label “G.G(Grand Generation)” instead of“senior”

MizunoKao, one of the major Japanese
cosmetic manufacturers

Released “water walking wear,”targeted at people in their 60s.
The company employed a 30’s
lady in order to make sure themodel does not feel “senior”
and fits current 60s

28

Does not use the wording“koureisha” and “senior” fortheir products

The “Baby Dankai Generation”
The children of the Dankai: A consumer force to be
reckoned with?

29

Prospective spending (within 2-5 years) by Dankai and Dankai
Junior“Do you see yourself and your household spending more or less within
the next 2 to 5 years”% of respondents who expect to spend
more within the 2-5 years
706050403020
100A lot more

463116330

28

Dankai Junior (42-46)

Dankai (65-69)%

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 201730

Some more

The Dankai Junior are at the more ambitious stage in life thantheir parents
Competitive Drive by Demographic Group

Demographic Group

Want to be rich (Live inluxury)% people who agree

Want to be “winners oflife”% people who agree

Dankai
1947-1949

21%

33%

Dankai Junior
1970-1979

37%

47%

Source: データでわかる団塊の財布・ジュニアの財布 (2014), page 72.

31

Average income per person and per household is high and still
growing for the age group comprising the “Dankai Junior”
Average annual income per person and household by age - 2015
900768.1

800
686.9

700
600

558.9

541.9

525.8

500
400

386.7

365.3

300
200

262.4
176.4

178.8

214.1

217.9

183.8

211

1000

<2930s40s
Per person

50s
Per household

Unit = 10,000
Source: Ministry of Health, Labor and Welfare of Japan

3260s

>70

National
averageThe “Dankai Junior” is the last generation to pass on traditions

Dankai(Traditional)

••••

33

Seniority
Patriarchic society
Non-IT
Face-to-facecommunication

DankaiJunior

Millennials(Innovative)••••

Meritocratic
Gender equality
IT
Email, social
media, webconferences

Overview of potential markets for the Dankai Junior generation
Markets with potential demand for people born between 1970 and 1979
2016
(Age 37-46)

2021(Age 42-51)

2026(Age 47-56)

Education• For themselves• For their children(both formal andinformal education)

Real Estate• House purchasing in
the mid-40s

Food• Healthy and organic
trend

ApparelEducation• Children entercollege/university

Insurance

Beauty/cosmetics

Insurance

Traveling

Based on own study (2016)

34SENTIMENT TOWARDS THE US IN JAPANMarch 2017

A majority of Japanese show interest in US current affairs and its
effect on Japan“How interested are you in US news, current affairs and politics and its
effect on Japan?”Very interested

1656% interested

Somewhat interested

40

Neutral27

Somewhat disinterested

10Very disinterested

17% notinterested

7020%

40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 20173660

Japan is a tough audience

37

Opinion of the US among Japanese is moderate, but favorable innet terms“How favorable is your opinion of the United States as a country?”

Strongly favorable

5Somewhat favorable

31% favorable

26

Neutral53

Somewhat unfavorable

1216% unfavorable

Strongly unfavorable

4020%

40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 2017
38

60

Sentiment towards the United States among Japanese is moving
in a clear negative direction“How is your opinion of the United States currently changing?”

Strongly more positive1

Somewhat more positive

11% morepositive

10

Neutral46

Somewhat less positive

36
43% less positive

Strongly less positive

7020%

40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 2017
3960

SENTIMENT TOWARDS POTUS
March 201740

Sentiment towards Trump is clearly negative among Japanese“How favorable is your opinion of the US President Donald Trump and hisadministration?”
Strongly favorable

1Somewhat favorable

8% favorable toTrump

7

Neutral38

Somewhat unfavorable

30

Strongly unfavorable

54% unfavorable
to Trump

24020%

40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 2017
4160

Sentiment towards Trump among Japanese is trending morenegative“How is your opinion of the US President Donald Trump and hisadministration currently moving?”
Strongly more positive1

Somewhat more positive

10% morepositive

9Neutral46

Somewhat less positive

25

Strongly less positive

44% less positive

19020%

40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 20174260

Around 1 in 4 Japanese are less likely to buy American becauseof the current administration“To what extent does your level of trust and confidence in the US president and hisadministration have on your trust and likelihood to consider to buy and do business with USbrands and their associated goods, products and services?”

A lot more likely

1Somewhat more likely

5% more likely tobuy American

4Neutral68

A little less likely

16

A lot less likely

27% less likely tobuy American

11020%

40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 20174360

Around 1 in 4 Japanese consider the US less attractive forpleasure travel because of the current administration“Since the change in US Government, how appealing is the US as a travel destination (forpleasure) for you in the near future?”

Much more appealing

3Appealing

9% more likely tovisit the US for
pleasure

6Unchanged

63

Somewhat less appealing

15

Much less appealing

13020%

28% less likely tovisit the US for
pleasure
40

Base: Japanese aged 15-69, n=1000
CarterJMRN: Japan Consumer Economic Sentiment Survey March 20174460

In summary
Japan’s economy is not likely to grow much further in nominal terms, but it
remains enormous and enormously wealthy
Within a shrinking total population, key demographic cohorts show increasing
ability to spend en masse– Wealthy, self-actualising baby boomers (dankai)– Baby dankai entering peak spending years– Younger people who, though much smaller in number, should be optimistic and will havethe pick of work and at very high salaries

Immigration will come, only as much as needed
US brands and their associated goods and services have room to build a more
attractive and aspirational image
Politics is a new risk factor that cannot be ignored

45

Contact us

We are always happy to chat further

The Carter Group
CarterJMRN KKTokyo Head Office
VORT I Nogizaka 4FRoppongi 7-2-29, Minato-ku
Tokyo 106-0032, Japan
Phone: +81 3 6434 0520
Contact: Dominic Carterd.carter@the-carter-group.com
www.carterjmrn.com