Japan Could Lose a Third of its Population by Mid-century as Births Continue to Decline
In the latest discomforting milestone for a country facing a steep population decline, Japan’s Ministry of Health, Labor and Welfare reported that the country’s number of births last year dropped below one million for the first time. The shrinking of the country’s population—deaths have outpaced births for several years—is already affecting the economy in areas including the job and housing markets, consumer spending and long-term investment plans at businesses.
For now, the Japanese economy is growing despite a dwindling number of workers and consumers. Output rose for a fifth straight quarter at the start of this year, and the stock market reached its highest level in a year and a half recently, with the Nikkei-225 index exceeding the symbolic 20,000 mark. Growing global demand for Japanese products is one reason. But the real decline has barely begun.
After Japan’s population hit a peak of 128 million at the start of the current decade, it shrank by close to a million in the five years through 2015, according to census data. Demographers expect it to plunge by a third by 2060, to as few as 80 million people—a net loss of a million a year, on average. About 40% fewer children were born in Japan last year than in 1949, at the peak of the country’s post-World War II baby boom. The number had not fallen below one million since 1899, when comprehensive record-keeping began. At that time, Japan’s population was smaller than it is today, but individual families tended to have more children.
For some, the latest numbers offer advantages. Unemployment was 2.8 percent in April, the lowest in decades, and construction in Japan’s famously crowded cities has slowed. Yet the prevailing view of Japan’s demographic future is grim. Fewer young people means fewer workers to support a growing cohort of retirees, adding strains to pension and health care systems. Already, in some rural areas, a majority of residents are over 65, and empty houses are a spreading blight.
In a speech to business leaders this week, Prime Minister Shinzo Abe called for a “national movement” to address Japan’s demographic challenges. The government has taken steps to keep older workers in their jobs longer, and to encourage companies to invest in automation. “The labor shortage is getting serious,” he said. “To overcome it, we need to improve productivity.” Japanese governments have been promising to tackle the population decline for decades, but with little apparent effect. Official efforts to encourage women to have more children have had only modest results, and there is little public support for large-scale immigration — something that has helped to stabilize populations in other wealthy countries with low birthrates.
Birthrates have, in fact, risen slightly compared with a decade ago. But with women marrying later—in part, specialists say, to avoid pressure to give up their careers—prospects for a more decisive turnaround look remote. And as the population decline accelerates, economic growth will be harder to pull off. How much the population size will fall is difficult to predict, but the basic trajectory is clear, demographers say.
Japan’s birthrate has long been lower than what demographers call the “replacement rate.” As a result, rates have been low long enough that each new generation of potential mothers is also smaller, compounding the downward pull. Individual Japanese will not necessarily be poorer just because the economy is smaller. But some economists argue that traditional definitions of growth and prosperity will need to be rethought. “A lot of the things we’re used to in Japan are really products of an era of population growth, like single-breadwinner families and mandatory retirement ages,” said Takaaki Tahara, research director at the Japan Institute for Labor Policy and Training. “The mind-set will have to change.”
Citations
- http://nyti.ms/2rDvfGH NY Times
- http://bit.ly/2sqqT3C – Nippon.com
Parachute Home Looks to be the Warby Parker of Sheets
Ariel Kaye got into home décor while attending New York University, where she liked to spruce up her apartment with items such as bookshelves made of reclaimed wood. When she studied abroad in Florence, she practiced her Italian in the textile markets, and while pursuing a master’s degree in media studies at Manhattan’s New School, she started a design blog. “I was the person at a bar who, when people asked me what I did, I would say I was an interior designer. Even though I wasn’t,” says Kaye, 33. In reality, she worked in public relations, then advertising, where she witnessed the rise of online direct-to-consumer companies such as Warby Parker.
Millennials might have had a go-to brand for eyewear, but Kaye realized they didn’t have one for sheets. She’d finally found her calling with home goods. “I had never had a brand ask me how I slept at night,” she says, noting that people can run hot or cold when they sleep. “I felt like the bedroom was a place where I could drive loyalty.” After a European trip during which she visited 15 factories, Kaye introduced Parachute Home in January 2014. Within a week, sales went from three sets of sheets a day to 50, thanks to rapturous coverage on design blogs.
Today, Parachute’s roster of products includes not only sheets (its signature Venice set starts at $219) but also linen napkins ($30 for two) and looped bath rugs ($49), and Kaye is chief executive officer of a company with 31 employees and $30 million in projected revenue for 2017. While homeware giants such as Bed Bath & Beyond Inc. are closing outlets, Kaye is starting to build an offline footprint for Parachute, putting branded hotel suites on top of its stores.
Joe Derochowski, who tracks the $13 billion bedding industry for market-research firm NPD Group, says Parachute and online mattress peddlers such as Casper Sleep Inc. and Tuft & Needle have done a “phenomenal job of de-commoditizing the sleeping industry. They talk about a product’s benefits, why you should buy it, how you should buy it. They educate the consumer,” he says.
Parachute tries to take the marketing-speak out of buying sheets by articulating the feelings they evoke rather than using classic talking points about, say, thread count. Kaye says “organic” cotton is a meaningless label, for example, because “you can still use formaldehyde in the manufacturing process.” Parachute’s website stresses the company’s connection to textile artisans; it describes percale as “cool and crisp to the touch” and linen as “light and airy,” both good options for sleepers who run hot. None of these choices was made on a whim: Parachute has a team of in-house analysts who maintain dashboards of customers’ demographic data and gain additional insights from social media to figure out what buyers might want next. Kara Nortman, a partner at Upfront Ventures, which led Parachute’s last two funding rounds, says of Kaye: “Talking to her about fabrics is like talking to a Google engineer about AI or machine learning.”
Parachute’s hospitality arm is a response to the reality that customers are not likely to buy a set of sheets, let alone napkins, all that often. For a nightly rate starting at $650, anyone can stay in a 2,000-square-foot suite above the company’s Venice, Calif., headquarters, furnished with Parachute products. “Relax, sleep in, take a bubble bath, do whatever you want to do,” Kaye says. (If, once you leave, what you want to do is apply the company’s beachy-casual aesthetic to your own home, Parachute’s blog offers advice on styling sheets and throwing a dinner party using its table linens.)
Parachute’s second store-hotel will open in Portland, Ore., this summer. Like the Venice location, it will be next to an artisanal ice cream shop. “I joke that, in the future, we’re only opening stores next to ice cream places,” Kaye says. “I sort of love that as a strategy.”
Citations
- https://bloom.bg/2srxI4f – BusinessWeek
- http://read.bi/2qLG8D1 – Business Insider
The Good News Is . . .
- U.S. consumer spending recorded its biggest increase in four months in April and monthly inflation rebounded, pointing to firming domestic demand early in the second quarter. The Commerce Department said that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4% last month after an upwardly revised 0.3% gain in March. April’s increase was the biggest since December and could ease concerns about second-quarter economic growth. Personal income rose 0.4% last month after gaining 0.2% in March. Income at the disposal of households after accounting for inflation advanced 0.2%.
- VMware Inc., a global leader in cloud infrastructure and business mobility applications, reported earnings of $0.56 per share, an increase of 47.4% over year-earlier earnings of $0.38 per share. The firm’s earnings topped the consensus estimate of analysts by $0.04. The company reported revenues of $1.74 billion, an increase of 9.3%. Management attributed the results to strong demand for its cloud-based digital workspace offerings.
- First Data agreed to buy CardConnect, a fellow payment processor, for about $750 million in cash, in its biggest takeover since going public in 2015. First Data is one of the world’s biggest payments processors, handling some $2.2 trillion worth of transactions each year. CardConnect processes about $26 billion worth of payments annually. Based in King of Prussia, Penn., CardConnect recorded sales of about $589 million last year, but lost nearly $16 million. CardConnect went public last year when it was acquired by FinTech Acquisition Corporation, whose public stock converted to CardConnect stock. Under the terms of the deal, First Data will pay $15 a share.
Citations
- http://reut.rs/2rwfsao – Reuters
- http://cnb.cx/2lwnm3s – CNBC
- http://bit.ly/2qShyj2 – VMware Inc.
- http://nyti.ms/2rQY1oh – NY Times Dealbook
Planning Tips
Guide to Traditional IRA Rollovers
Have you thought about rolling your traditional IRAs from one financial institution to another? Maybe you are looking for higher returns, more investment selections or better service. If you roll over your traditional IRA, there are some common mistakes you must avoid. IRA rules can be tricky and some have changed over the years so you need to be careful, otherwise you could pay income tax and penalties. Below are some key IRA rollover rules and tips to help you avoid breaking them. Be sure to consult with your financial advisor to determine the best IRA rollover strategy for your situation.
The 60-Day Rule – After you receive the funds from your IRA, you have 60 days to complete the rollover to another IRA. If you do not complete the rollover within the time allowed—or do not receive a waiver, or extension, of the 60-day period from the Internal Revenue Service (IRS)—the amount will be treated as ordinary income by the IRS. That means you must include the amount as income on your tax return, where any taxable amounts will be taxed at your current, ordinary income tax rate. Plus, if you did not reach age 59½ when the distribution occurred, you will face a 10% penalty on the withdrawal.
One-Year Waiting Rule – Within one year, after you distribute assets from your IRA and roll over any part of that amount, you cannot make another tax-free rollover of any IRA. Before 2014, the one-year rule only applied to making additional rollovers from the same IRA to another (or the same) IRA. The once-a-year limit on IRA-to-IRA rollovers does not apply to eligible rollover distributions from an employer plan. Therefore, you can roll over more than one distribution from the same qualified plan, 403(b) or 457(b) account within a year. (Note: This one-year limit also does not apply to rollovers from Traditional IRAs to Roth IRAs, i.e. Roth conversions.)
RMDs Not Eligible for Rollover – You are allowed to make tax-free rollovers from your IRAs at any age, but if you are 70½ or older, you cannot roll over your annual required minimum distribution (RMD) because it would be considered an excess contribution. If you are required to take an RMD each year, be sure to remove the current year’s RMD amount from your IRA before implementing the rollover.
Same Property Rule – Your rollover, from one IRA or to another IRA, must consist of the same property. This means that you cannot take cash distributions from your IRA, purchase other assets with the cash and then roll over those assets into a new (or the same) IRA. Should this occur, the IRS would consider the cash distribution from the IRA as ordinary income.
Consider a Transfer Instead of a Rollover – If you are simply moving your IRA from one financial institution to another and you do not need to use the funds, then you should consider using the transfer method, instead of a rollover. A transfer is non-reportable and can be done an unlimited number of times during any period. A transfer removes the withdrawal process of the rollover, which ensures that the assets go directly to their end account and investors remove the risk associated with the 60-day rule.
Citations
- http://bit.ly/2c7qx8K – IRS
- http://bit.ly/2rQQnKt – Bankrate.com
- http://bit.ly/2qNpLKe – Investopedia
- http://bit.ly/2rDQkkr – TheBalance.com
- http://bit.ly/2rDQmsz – Fidelity
