[Korea-Japan Comparison]⑦ Elderly Consumption Hindered by Real Estate... Time for the Rise of 'Active Senior' Now

[The Era of 10 Million Elderly, Learning from Japan]⑦
Korean Elderly Mainly Watch TV in Leisure Time
South Korea Sitting on Real Estate... Increasing House-Poor Retirees
Japanese Elderly Who Experienced Bubble Economy Collapse Shift from Physical to Financial Assets
Emergence of 'Active Seniors' Enjoying Various Leisure Activities

Elderly person watching TV (stock photo)

Mr. Kim Junsung (72), who lives in Mapo-gu, Seoul, starts and ends his day with TV. As soon as he wakes up in the morning, he turns on the TV to watch news and documentary programs, and in the evening, he watches sports games or dramas before falling asleep. Except for a brief walk during the day, he spends most of his time with the TV. Mr. Kim said, "After retiring from work about 10 years ago, I tried various hobbies like table tennis and volleyball, but as I got older, I found it most comfortable to rest at home and watch TV."

96.6% of Korean Elderly Center Their Leisure Activities Around TV Viewing

According to a 2020 survey by the Ministry of Health and Welfare targeting 10,097 elderly people aged 65 and over nationwide, 96.6% of Korean seniors placed TV and radio at the center of their leisure activities. The average daily TV viewing time for the elderly was 4.2 hours, and 39% watched TV for more than 5 hours a day. The most desired leisure activity among seniors was TV viewing at 38.3%, followed by walking at 31.9%, and tourism activities at 12.7%.

Why are Korean seniors not very active in leisure cultural activities? This is pointed out to be related to their financial situation. Among Korean elderly, 36.9% participate in economic activities for income purposes. Among those working, 73.9% do so to cover living expenses. This indicates that many elderly face financial difficulties.

As of 2020, the average annual personal income of Korean seniors was 15,576,000 KRW, with public transfer income accounting for the largest share at 27.5%. Public transfer income refers to government-supported basic pensions or national pensions, mostly used to maintain minimum living expenses such as housing and meals. As of 2022, the poverty rate among Korean elderly was 38.1%, the highest among OECD member countries.

How about elderly people in Japan? According to the OECD, Japan's elderly poverty rate was 20.2% in 2022, only about half that of Korea. A 2021 survey by the Japanese Cabinet Office showed that 70% of Japanese seniors aged 65 and over did not face significant economic difficulties.

This is possible because Japan's pension situation is much better than Korea's. According to the Korea Economic Research Institute, as of 2021, the average monthly public pension benefit for Korean elderly was 670,000 KRW for single-person households and 1,190,000 KRW for couples. In contrast, Japan's average monthly public pension benefit was about twice as high, at 1,350,000 KRW for individuals and 2,270,000 KRW for couples.

Korea's private pension system is also relatively weak. The average monthly private pension benefit in Korea was 160,000 KRW for single-person households and 200,000 KRW for couples, only about half of Japan's 290,000 KRW for individuals and 460,000 KRW for couples. Japan, having undergone pension reforms in the early 2000s during a period of intensified aging, established a public pension system where people pay more and receive more, allowing retired elderly to enjoy a relatively affluent old age compared to Korea.

Thanks to this, Japanese elderly have more diverse hobbies than Koreans. Japanese seniors enjoy various hobbies such as traveling, sports activities, and volunteering, in addition to watching TV. Many elderly actively consume based on stable economic power.

Korean Elderly Sitting on Real Estate, Unable to Open Their Wallets

One reason Korean elderly are relatively inactive consumers is that their accumulated wealth is tied up in real estate. Their income after retirement has decreased, but their assets are concentrated in real estate, which is difficult to liquidate.

This is also reflected in statistics comparing major countries. According to data from the Korea Financial Investment Association in 2022, the proportion of non-financial assets in household assets was 64.4% in Korea and 37% in Japan, indicating a higher proportion of real estate and other non-financial assets in Korea. The proportion of financial assets was relatively low compared to major countries. The elderly are even more affected. According to Statistics Korea's "2023 Elderly Statistics," as of 2022, real estate accounted for 82.4% of the assets held by households aged 65 and over.

In Japan, after the collapse of the bubble economy in the 1990s, public expectations for real estate price increases generally declined. Household assets steadily shifted from tangible assets to financial assets. Due to the trauma at that time, Japanese elderly tended to avoid investing in stocks or real estate, resulting in periods when deposits and savings accounted for 60% of financial assets.

Professor Lee Changmin of the Department of Convergence Japanese Area Studies at Hankuk University of Foreign Studies explained, "The government has put a lot of thought into how to transfer the financial assets held by the elderly to other generations or channel them into the stock and bond markets, which led to recent policies such as the new NISA (tax-exempt small investment system)."

Meanwhile, Japanese elderly held highly liquid deposits and savings, and their pension system is long-established, including a 'housewife pension' given to spouses. However, Korea's pension system has been implemented only recently, so elderly people do not receive much pension, and as retirees increase, the number of 'house poor'?those who have no cash flow but are sitting on real estate?is expected to rise.

Professor Lee said, "Korean elderly have lived through an era of real estate invincibility, so they have significant anxiety about selling their homes too early, thinking 'the market will rise soon.' Also, inheritance tax issues make it difficult to pass on property to children, so many are stuck in a dilemma. In this context, the Korean government will have to solve even more difficult challenges than Japan in the future."

Active Seniors Emerge in Large Numbers in Japan

In Japan, elderly people who actively consume based on stable economic power after retirement are called "active seniors." The term became popular around 2007, when the baby boom generation in Japan, known as the Dankai generation, born between 1947 and 1949, began to retire. The Dankai generation, with more economic power than previous generations, retired and entered a super-aged society, significantly changing Japan's consumption structure.

According to the Japanese Cabinet Office, the consumption expenditure of senior households aged 60 and over accounts for about half of the total consumption of all generations, exerting significant influence on the Japanese economy. Also, the savings ratio of senior households aged 60 and over accounts for two-thirds of the total, indicating substantial wealth.

Elderly People Enjoying Park Golf (Stock Photo)

Namiseon, a senior researcher at Daishin Securities, explained, "The Dankai generation, representing active seniors, was born during a period of rapid social change in Japan after World War II, so they tend to respond sensitively to new products and services. Since the Dankai generation was approaching retirement from 2007, companies focused on their retirement lump-sum payments and began studying them."

Noriko Sasaki, former professor of Silver Industry Studies at Kangnam University, who has researched senior generations in Japan and Korea, said, "The active senior industry in Japan developed in earnest as the baby boom generation retired. Korea's related industry is also expected to grow as the baby boom generation begins retiring after 2020."