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Speaker 1: Bloomberg Audio Studios, podcasts, radio news Home on This at All.

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Speaker 2: Chizuko is a seventy six year old retyree who lives

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Speaker 2: in the Japanese rural district of the Kui just north

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Speaker 2: of Kyoto. Her daughter Ma is fifty five. Chizuko and

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Speaker 2: my are pseudonyms that they've asked us to use for

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Speaker 2: privacy because they're talking about their family's finances. They were

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Speaker 2: interviewed by Bloomberg in October.

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Speaker 1: So Chizuko, she lives in you know, one of the

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Speaker 1: rural parts of the prefecture, kind of surrounded by by

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Speaker 1: a lot of forestry and ricefield.

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Speaker 2: That's Alice French, who covers the Japanese stock market out

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Speaker 2: of Tokyo.

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Speaker 1: She's been an active stock investor since she was kind

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Speaker 1: of in her thirties or forties, so her finances are,

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Speaker 1: you know, important to her. She's built up quite a

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Speaker 1: nice nest egg or. But she's a pensioner now and

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Speaker 1: she relies quite heavily on those savings that she's built up.

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Speaker 2: Like many Japanese families, the pair rarely talk about money,

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Speaker 2: but recently Chizuko's downer heard something that pushed her to

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Speaker 2: finally broach the topic of financial planning with her mind.

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Speaker 1: My the daughter was telling us that she's kind of

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Speaker 1: been hearing stories recently, one of which came from another relative,

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Speaker 1: one of her relatives. Basically, their account was found frozen

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Speaker 1: after they passed away.

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Speaker 2: My said, the children of her elderly relative had no

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Speaker 2: idea the account had been frozen. When it came time

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Speaker 2: for them to handle the state, they were shocked to

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Speaker 2: discover that they couldn't access their parents' money.

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Speaker 1: And this kind of really triggered an anxiety for my

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Speaker 1: You know, she's thinking, you know, her parents are also

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Speaker 1: kind of getting to that age. They're relying on a pension,

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Speaker 1: and obviously, you know, one never really wants to have

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Speaker 1: to think about your parents kind of becoming able to

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Speaker 1: handle things themselves, but it is a reality and something

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Speaker 1: that you have to think about.

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Speaker 2: It's a reality playing out all over the world as

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Speaker 2: population's age and families plan for their futures. In Japan,

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Speaker 2: home to the world's oldest population, there's a greater sense

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Speaker 2: of urgency to the planning. That's because almost a third

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Speaker 2: of the country, around thirty six million people, are over

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Speaker 2: the age of sixty five.

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Speaker 1: More and more seniors are now reaching that age where

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Speaker 1: they might be experiencing dementia or you know, these kind

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Speaker 1: of financial risks that come with aging, whether that be

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Speaker 1: kind of rash purchases, sudden selling.

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Speaker 2: In Japan, these financial risks aren't confined to small pocketbook issues.

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Speaker 2: Seniors with symptoms of cognitive decline now control trillions of

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Speaker 2: dollars in liquid assets. That's cash and investments in stocks,

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Speaker 2: bonds and other securities. Assets that are at risk of

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Speaker 2: being mismanaged are not being put to you in the economy.

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Speaker 1: It's almost half of Japan's GDP that falls into this category.

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Speaker 1: And you know, from health economists to think thanks to lawyers,

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Speaker 1: all of the people that we spoke to are basically saying,

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Speaker 1: as that pile of assets grows, it's going to slow

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Speaker 1: down consumption, it's going to slow down markets, it's going

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Speaker 1: to start impacting economic growth. It's kind of got to

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Speaker 1: a level now where I think it's becoming difficult to ignore,

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Speaker 1: and that's really started to raise alarm bells in Japan

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Speaker 1: but also across other economies.

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Speaker 2: This is the Big Take Asia from Bloomberg News. I'm Wanha.

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Speaker 2: Every week we take you inside some of the world's

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Speaker 2: biggest and most powerful economies and the markets, tyccoons, and

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Speaker 2: businesses that drive this ever shifting region. Today, on the

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Speaker 2: show Japan's Dementia Dilemma, a growing share of the country's

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Speaker 2: financial assets are controlled by the elderly, many at risk

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Speaker 2: of cognitive decline. Why that's a problem for everyone, not

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Speaker 2: just Japan, and what the Japanese are doing about it.

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Speaker 2: In Japan, older people have a lot of financial power.

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Speaker 2: Those over sixty five control more than half of the

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Speaker 2: fourteen trillion dollars in cash and securities held by Japanese households.

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Speaker 2: But Bloomberg's Alice French says a big chunk of those

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Speaker 2: liquid assets is held by people with dementia and cognitive issues.

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Speaker 1: We understand from data from Sumitomo Mitsui Trust Bank that

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Speaker 1: it's at around two trillion dollars, which is around three

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Speaker 1: hundred and fifteen trillion yen. Now that includes people who

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Speaker 1: have an actual dementia diagnosis, but it also encompasses people

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Speaker 1: with something called mild cognitive impairments. Now, this is usually

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Speaker 1: something that comes in kind of in the years before

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Speaker 1: you might get in a dementia diagnosis, you know, sort

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Speaker 1: of from the age of sixty five onwards, many older

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Speaker 1: people do start to experience kind of lapses in memory,

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Speaker 1: you know, struggling with judgment and things like that, and

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Speaker 1: just kind of overall cognitive decline.

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Speaker 2: People may develop cognitive decline in dementia due to a

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Speaker 2: variety of factors, including genetics and lifestyle choices, but age

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Speaker 2: is the strongest known risk factor, with research showing that

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Speaker 2: the risk of developing dementia rises after sixty five. In Japan,

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Speaker 2: the population of elderly with cognitive decline is growing fast,

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Speaker 2: and Alice says there are big financial risks associated with

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Speaker 2: what some are calling dementia money.

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Speaker 1: I've heard stories of seniors with dementia or kind of

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Speaker 1: cognitive issues, for example, suddenly donating huge amounts to charities

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Speaker 1: that they love, or you know, buying into into schemes

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Speaker 1: that it's not necessarily scamming, but it's sort of just

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Speaker 1: perhaps what one would describe as ill advised spending. It

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Speaker 1: can also creep in in ways like missed bill payments

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Speaker 1: that obviously affects credit scores, and then kind of on

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Speaker 1: a bigger scale, you know, obviously fraud is a huge problem.

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Speaker 1: We know that in Japan over sixty percent of financial

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Speaker 1: scams in twenty twenty four were targeted at over sixty fives,

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Speaker 1: which is pretty staggering. The older population is seen as

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Speaker 1: more vulnerable to this, and of course that's only exacerbated

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Speaker 1: if you have dementia or some you know, cognitive issues.

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Speaker 2: Financial firms can freeze accounts or place limits and restrictions

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Speaker 2: on them if they identify what they considered to be

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Speaker 2: erratic spending patterns. Research from Tokyo's Kale University shows that

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Speaker 2: about eleven percent of adult children who take over their

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Speaker 2: elderly parents' finances have found those accounts frozen.

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Speaker 1: In terms of how they're actually implemented these freezes, it

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Speaker 1: really does vary from sort of company to company and

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Speaker 1: from bank to bank. One of the firms that we

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Speaker 1: spoke to said that their staff make annual visits to

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Speaker 1: clients who aged over seventy five instead of judges their

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Speaker 1: cognitive ability is now. Of course, you know, in most

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Speaker 1: of the cases these sort of securities firms employees they

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Speaker 1: don't have a medical background, and instead of having to

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Speaker 1: just use their best judgment, obviously one would assume with

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Speaker 1: the client's best interests, you know, at heart, but it

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Speaker 1: is a very difficult judgment called.

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Speaker 2: Money in a frozen account can't be stolen by a

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Speaker 2: scammer or squandered by an older person who might not

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Speaker 2: understand how they're spending. But it can't be accessed by

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Speaker 2: the account holder's children either, and that's a problem. They

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Speaker 2: might need that money to pay for their parents' care,

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Speaker 2: and if they can't access it, they might end up

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Speaker 2: paying for that care themselves. The accounts can be unfrozen,

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Speaker 2: but that can be a long bureaucratic process, and it

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Speaker 2: doesn't always happen. In some cases, money in those frozen

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Speaker 2: accounts is not claimed at all and ends up in

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Speaker 2: the hands of the government.

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Speaker 1: So that means that a lot of this money ends

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Speaker 1: up doing whether it's in cash piles unde seni as

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Speaker 1: mattresses at home, or whether it's sitting in bank accounts.

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Speaker 2: Alice says this growing pile of dormant dementia money has

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Speaker 2: implications for Japan's economic growth. Japan is struggling to boost

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Speaker 2: its economy after decades of deflation. The country needs its

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Speaker 2: people to spend that money, not let it sit idle

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Speaker 2: in frozen or dormant bank accounts.

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Speaker 1: One of the think tanks that I spoke to for

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Speaker 1: the story, For example, had this stat that said that

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Speaker 1: if the kind of dormant money the over sixties are

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Speaker 1: sitting on, if only zero point two percent of that

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Speaker 1: money was actually actively spent, it could boost GDP by

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Speaker 1: one percent.

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Speaker 2: There's an irony here. Some banks are worried that their

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Speaker 2: older customers might be taking too many risks with their money.

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Speaker 2: Some corporations, on the other hand, are concerned that their

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Speaker 2: older investors might not be taking on enough risk. Forty

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Speaker 2: two percent of retail investors in Japan or over sixty.

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Speaker 2: Alice says if those people become too risk averse as

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Speaker 2: the age, that could affect a company's liquidity and even

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Speaker 2: its corporate strategy.

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Speaker 1: If a big chunk of your shareholders, for example, have

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Speaker 1: dementia or are either unable or unwilling to kind of

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Speaker 1: actively use their shareholding rights, that can get in the

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Speaker 1: way of acquisition deals, That can get in the way

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Speaker 1: of things like corporate governance decisions.

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Speaker 2: She says, it's becoming a big issue for family owned companies.

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Speaker 2: More than ninety percent of businesses in Japan are family owned,

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Speaker 2: and over half of companies are run by people aged

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Speaker 2: sixty and older. This all adds up to a looming

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Speaker 2: issue for corporate Japan.

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Speaker 1: For example, if the founder is still the majority shareholder

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Speaker 1: but maybe has dementia or is just aging and is

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Speaker 1: unable to use those shareholder rights. M and A deals

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Speaker 1: have been collapsing. You know, you can't even do something

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Speaker 1: as simple, for example, as appointing a new board member

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Speaker 1: if you can't get a majority shareholder approval. And of

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Speaker 1: course this is all happening against the backdrop of Japan

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Speaker 1: trying to push forward with corporate governance with better capital efficiency.

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Speaker 1: We've got an M and A boom that's continuing here

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Speaker 1: and is expected to boom even more in twenty twenty six.

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Speaker 1: So this kind of is I think a real tangible

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Speaker 1: risk and that will start to have I think a

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Speaker 1: rippling effect across the markets and across lots of different

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Speaker 1: asset classes.

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Speaker 2: What is Japan's government doing to protect its aging investors

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Speaker 2: and how does it plan to tap into those dormant

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Speaker 2: trillions that's after the break. Japan's population is aging faster

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Speaker 2: than any other in the world, and the number of

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Speaker 2: Japanese people with dementia is growing fast too. That makes

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Speaker 2: the problems that with having assets controlled by people living

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Speaker 2: with cognitive issues hard to ignore. Luombrig's Alice French says

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Speaker 2: that Japanese government is taking action that includes reviewing Japan's

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Speaker 2: guardianship law. Similar to power of attorney in the US.

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Speaker 2: The law allows family members to take legal control of

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Speaker 2: a relative's finances if dementia sets in.

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Speaker 1: Only around five percent of dementia suffers in Japan right

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Speaker 1: now are using that system, and the government would like

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Speaker 1: to boost that now. It seems that one of the

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Speaker 1: main reasons that people are a little bit wary of

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Speaker 1: using the system right now is that once you're in it,

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Speaker 1: once you sign on for this guardianship system, you can't

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Speaker 1: get out. That does kind of put off some people

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Speaker 1: who might, for example, change their mind. So the government

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Speaker 1: is looking at the possibility of bringing in that option

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Speaker 1: that you could withdraw at a later stage once you're

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Speaker 1: in it, and they hope that that kind of new

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Speaker 1: level of flexibility will bring more people into the guardianship system.

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Speaker 2: Alice says the committee reviewing changes to the existing law

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Speaker 2: could propose amendments as soon as this year, but it

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Speaker 2: could take years for those changes to take effect. Until then,

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Speaker 2: banks and securities firms are coming up with their own

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Speaker 2: solutions to ensure that their elderly clients' assets are protected,

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Speaker 2: and some older people alert to their circumstances are working

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Speaker 2: with them. Chizuko and Mi, who we met at the

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Speaker 2: beginning of this episode, had a frank conversation about Chizuko's

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Speaker 2: financial situation. They decided that Chizuko would make My a

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Speaker 2: guardian of a special family support account offered by a

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Speaker 2: local securities firm. Now, if Chizuko is unable to manage

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Speaker 2: her finances, My can make decisions on her behalf.

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Speaker 1: I think in many ways, this Moldota couple were kind

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Speaker 1: of a best case scenario, and the challenge here is

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Speaker 1: kind of scaling them to be the majority. The sense

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Speaker 1: that I've got for sure is that the finance industry

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Speaker 1: is rarely kind of out the forefront of sort of

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Speaker 1: this issue forwards and raising the awareness. So Ima Murdo,

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Speaker 1: who I spoke about, which physical uses, they were very

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Speaker 1: frank with us, you know. They were telling us that

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Speaker 1: they've seen a spike in in fraud and scams, particularly

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Speaker 1: amongst their elderly clients, and they really want to kind

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Speaker 1: of crack down on that because it's a risk for

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Speaker 1: them too. And in recent years, they have started, like

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Speaker 1: I say, bringing in these kind of solutions for their

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Speaker 1: senior clients so that they can manage their assets alongside

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Speaker 1: a younger family member. So these family support accounts are

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Speaker 1: kind of gaining traction. There's another company called Kagawa, which

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Speaker 1: is on Hikoku, one of the sort of more southern

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Speaker 1: islands of Japan, which has brought in a similar system

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Speaker 1: just in the last set of eighteen months or so

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Speaker 1: and has said that they've been surprised by the amount

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Speaker 1: of demand. The steps are gradual and small at this stage,

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Speaker 1: but there's definitely a sense that momentum is building.

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Speaker 2: And companies are beginning to look for ways around the

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Speaker 2: issues that come with having too many older shareholders. Japanese

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Speaker 2: telecoms provider MTT found in twenty twenty three that almost

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Speaker 2: half of its shareholders were aged over seventy. The company

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Speaker 2: solved the problem with the stock split, which had the

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Speaker 2: effect of diversifying the age of its shareholders.

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Speaker 1: So NTT, for example, did a twenty five for one

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Speaker 1: stock split in mid twenty twenty three, and they've now

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Speaker 1: seen the proportion of over seventies among their shareholders down

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Speaker 1: below twenty percent, So in that sense it was pretty effective, right,

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Speaker 1: and we've seen stock splits kind of shooting up over

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Speaker 1: the past few years. There are lots of reasons for it.

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Speaker 1: It's partly because of the sort of corporate governance drive

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Speaker 1: and the drive for better shareholder returns. Of course, if

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Speaker 1: you can attract younger shareholders, they'll hold your stock for longer.

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Speaker 2: But Alice says, one of the biggest challenges is the

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Speaker 2: lack of awareness of this looming financial dilemma.

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Speaker 1: It is quite a taboo topic and it's one of

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Speaker 1: the biggest challenges that we found actually in trying to

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Speaker 1: report on this theme, right, is that a lot of

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Speaker 1: people don't really want to talk about it. It is

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Speaker 1: a bit of a touchy subject. And I think that's

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Speaker 1: not just in Japan. I think all across the world.

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Speaker 1: Part of the problem is almost a kind of unwillingness

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Speaker 1: to want to confront your own weaknesses. We know that,

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Speaker 1: you know, a lot of market players across the world

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Speaker 1: obviously fall into the over sixty five category, and nobody

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Speaker 1: kind of wants to think that they might not be making,

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Speaker 1: you know, the best financial decisions on the day to day.

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Speaker 1: So I think there is definitely that resistance there to

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Speaker 1: kind of confront the reality people don't necessarily want to

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Speaker 1: think of themselves potentially losing independence in the ability to

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Speaker 1: handle things by themselves and having to rely on their kids.

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Speaker 2: That's if they have children to rely on. More seniors

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Speaker 2: are living alone in Japan. A government study estimates that

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Speaker 2: by twenty fifty, as many as twenty percent of Japanese

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Speaker 2: households could be occupied by elderly people living alone and

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Speaker 2: potentially handling their finances without any support. That means the

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Speaker 2: burden would all tutimately fall on the government and the

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Speaker 2: financial industry. Japan is working hard to find solutions, and

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Speaker 2: the world is paying close attention. That's because dementia and

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Speaker 2: cognitive decline are beginning to take a toll on economies

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Speaker 2: across the world.

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Speaker 1: In the US, around six trillion dollars could be owned

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Speaker 1: by dementia sufferers in the States right now. Now. That

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Speaker 1: is not a number to sniff at, and obviously that's

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Speaker 1: something that again is only going to grow as the

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Speaker 1: population continues to age. South Korea, another Asian nation that

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Speaker 1: is often in the headlines for its aging population, over

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Speaker 1: one hundred billion dollars held by dementia sufferers, A lot

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Speaker 1: of that in illiquid real estate.

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Speaker 2: There's a lot of talk about the rising tide of

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Speaker 2: dementia in Japan's population, and a lot of worry about

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Speaker 2: the knock on effect that this dementia money is having

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Speaker 2: on economic growth, But Alice says she's not seeing much

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Speaker 2: in the way of solutions.

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Speaker 1: I think for me, what surprised me, or I suppose

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Speaker 1: worried me the most, was kind of how haphazard the

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Speaker 1: solutions are at this stage. So for the financial industry,

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Speaker 1: they are desperately trying to get a handle on a

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Speaker 1: problem that I think has somewhat crept up on them.

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Speaker 1: You know, there is no overarching playbook about how to

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Speaker 1: deal with this. The pace of aging in Japan is

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Speaker 1: so fast, and I think a lot of people didn't

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Speaker 1: really think about the risks that will then come with

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Speaker 1: that from the financial side.

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Speaker 2: This is The Big Take Asia from Bloomberg News. I'm wanha.

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