Japan's Aging Economy

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As Japan’s population ages, fears about the effects of conditions like dementia on the economy, of all things, are growing. 

Currently, 29.4% of the country is over the age of 65, out of an overall population of 123 million. Additionally, over 10% of the country is over the age of 80.  This is starting to pose a challenge to the Japanese economy, as reports indicate that assets worth roughly half of country’s gross domestic product (GDP), are under the control of seniors experiencing cognitive decline.  

According to data from the Sumitomo Mitsui Trust Bank, in 2020, elderly Japanese citizens showing signs of cognitive decline controlled liquid financial assets worth $2 trillion USD. By 2040, that number is expected to reach $2.57 trillion USD. The current Japanese GDP is $4.27 trillion. These trends are particularly pronounced in rural areas, which has a higher population of elderly citizens.

In an interview with Bloomberg News, Satoshi Nojiri, CEO of FinWell Research, a financial consulting agency, noted that “The majority of older people don’t have measures in place to manage their finances, leaving them open to wealth loss and financial abuse,” dubbing the phenomenon “frightening.”

He further added that “Trillions are piling up in seniors’ accounts, but we have no real idea how to put that money to productive use.”

Japanese government data further showed that seniors are susceptible to online scams, accounting for 65% of 2024’s  $462 million in scam losses across that nation.

The Japanese financial industry is attempting to respond to this trend. Banks and securities firms are introducing measures such as “family support accounts,” which allow relatives to co-manage assets, and help desks designed for dementia patients and their families.

Lawmakers are also taking action. The Ministry of Justice is aiming to make the country’s adult guardianship law simpler and more flexible. Proposed amendments would enable family members to take legal control over a relative’s financial assets if they develop dementia.

However, while family-management arrangements may offer a solution, they are hardly an easy one. Conversations about money can be difficult, as many seniors struggle to accept decreasing independence, do not have children to rely on, or have interests that do not align with their family members.

 Jing Li, an Associate Professor of Health Economics at the University of Washington in the U.S., told  Bloomberg News that beginning at age 65, many seniors experience a gradual decline in executive function, particularly in memory and judgement, thus leading to “impaired financial decision-making.”

These risks are exacerbated by conditions like dementia, which is projected to affect 5.8 million people in Japan by 2040, accounting for 15% of the population above the age of 65.

As shown by data from the Organization for Economic Cooperation and Development (OECD), Japan has a much higher dementia rate compared to many of its peer nations, with an estimated 123 cases for every 1,000 people above 65.

OECD estimated dementia rates.

 By comparison, South Korea has 93 cases, Germany 69, and the United States 35 cases out of every 1,000 seniors.

Professor Li further explained that early signs of age-related financial mistakes include missed payments or impulsive spending, which can escalate into poor investments or falling for scams.

Kohei Komamura, a professor of economics at Tokyo University, also warned that aging-related cognitive decline can raise the risk of wealth loss.

His study, which surveyed about 2,200 Japanese seniors, found that those with symptoms of cognitive decline had 40% less financial wealth on average than their healthy peers, a gap he attributed to poor asset management. Further complicating the issue is the fact that only 1/3 of seniors discussed their finances with their children.

Some Japanese financial firms have begun freezing the accounts of clients who begin to show cognitive decline, but these accounts represent quite significant financial assets. According to FinWell Research, Japan’s GDP could rise 1% if those over 60 spent a mere 0.25% of the wealth they hold.

Experts agree that the first step towards addressing this issue is better family education to encourage earlier planning and awareness of the financial risks and realities that come with aging. A cultural shift towards more open conversations about money is also required, along with the legislative reforms that are currently underway.

In contrast to Japan, seniors are a far smaller portion of the population in the United States, with lower dementia rates. People over the age of 65 account for roughly 18% of the U.S. population, while they are nearly 30% of the population in Japan. Furthermore, there are roughly 35 cases of dementia for every 1,000 seniors in the U.S., far lower than Japan’s 123.

Nevertheless, Japan’s situation is a warning to the U.S. According to the Wall Street Journal, as of 2025, people over 70 controlled approximately 39% of all equities and mutual funds owned by households, up from 22% in 2007. Researchers from Stanford University surveyed 2,500 investors over the age of 55, and 84% of them said that they would not want to give up control of their financial assets during the onset of cognitive decline but wait for a moment before completely losing the ability to manage their money. Proactive reforms may be necessary to avoid the issues that Japan is currently experiencing.