We recently returned from our fourth Japanese conference within the past year, where we engaged with several dozen companies. Given the “widow maker” reputation of the Japanese equity market over the decades, we are particularly careful in our approach. Although near term uncertainties remain, we believe there are discernible pockets of optimism and growth underpinned by several structural trends.


Impact of the accelerating demographic shift

While Japan’s aging population trend is not new, its impact on the economy is becoming increasingly visible. The working age population in Japan is now declining by approximately 700,000 people per year, constituting about 1% of that demographic segment, a critical rate that has wide-ranging implications. Moreover, projections suggest that by 2025, one in three individuals will be aged 65 or older, with one in five being 75 or older. Almost all the companies we met told us about the labor challenges they are experiencing and the ensuing need to revamp their HR process. We had very productive meetings with companies which are poised to benefit directly from these trends, and that are mainly involved in healthcare and elderly care recruitment, facility operation, and technology-driven productivity improvements.