The Lemon Fool

Interesting article in the FTA about fears in Japan that the death of the post-war baby boomer generation will lead to a bear market as their children sell off the share portfolios their parents have built up.

https://www.ft.com/content/75cb43e2-d4f7-11e8-a854-33d6f82e62f8


Investors should expect decades of selling pressure on Japanese stocks from the most implacable bears in the market: the recently deceased, according to investment bank Nomura.The relentless sell-off, which threatens to intensify until the year 2040 as the huge, wealthy postwar baby boom generation expires, arises from an estimate that about 80 per cent of inherited shares are immediately sold by heirs.“The more people pass away, the more assets there are to be inherited,” concluded Nomura’s chief equity strategist, Hisao Matsuura, in a research note that prominently charted Japan’s steep mortality curve. Just over 1.3m Japanese died in 2017, and the figure will peak at about 1.7m a year in about 20 years’ time but, said Mr Matsuura, almost no statistics are available on inheritance patterns in Japan.

https://www.google.co.uk/search?q=Japan ... e&ie=UTF-8

Any idea what the inheritance patterns are like in Japan, the article cites 40 somethings as the most likely inheritors but given the Japanese population is both shrinking and ageing at a very sprightly rate how long is that likely to remain the case? Pensioners inheriting from pensioners would likely lead to a change in behaviour.

My best guess is this is classic wall of worry stuff, and that Japanese equities are in a secular bull market that will last as much as a couple of decades, driven by a variety of factors such as shareholder-value enhancing corporate reform, technology & innovation, immigration and inflation. Periodic bumps in the road to be expected, but with the secular trend (direction of travel) remaining intact.

If domestic heirs wish to liquidate, I'm sure global investors will on balance be happy to relieve them. Over time, as rising price works its mood magic, domestic behaviour will change and the diminution of a previous source of supply will eventually add an additional tailwind to stocks.