Why investing in Japan’s demographics is a must

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Ageing Japan faces plumbing problems as a significant portion of its water pipes are past their 40-year working life. This issue is compounded by the shrinking workforce and the increasing average age of water engineers. It would take 150 years to replace the entire network at the current rate, leading to potential messy situations.

Global investors are confronted with the unique challenge of enticing them to invest in Japanese stocks amid the country’s ageing population. Despite high foreign interest, doubts about Japan’s economic future persist, making it a harder sell. However, Japan’s demographics can be seen as a major “buy” signal in recent years.

Japan’s ageing population presents fundamental problems, similar to China, which may influence economic trajectory and put its leadership to the test. Despite this, Japan’s demographics align favorably with corporations and investors in key areas. Labor shortages allow companies to restructure more easily, divesting non-core businesses and focusing on their core strengths. Furthermore, domestic mergers and consolidation are now more feasible as concerns about layoffs diminish.

Another demographic dividend lies in the upcoming power shift in favor of the younger generation in Japan. The generation born between 1981 and 2000 holds fresh views on the world, with no attachment to seniority-based pay or lifetime employment. They are digitally inclined and have witnessed steady growth in Japanese stocks, making them more inclined to invest their savings effectively.

While Japan’s pipes may be ageing, its pipeline for growth and innovation looks promising.

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