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Originally published April 2, 2007 at 12:00 AM | Page modified April 2, 2007 at 2:01 AM

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Baby boomers' retirement starting to shake up Japan

The way Masahiro Shimizu sees it, he and Japan's other postwar baby boomers built the country into an economic powerhouse — and now...

ITO, Japan — The way Masahiro Shimizu sees it, he and Japan's other postwar baby boomers built the country into an economic powerhouse — and now it's time to enjoy the fruits of their labor.

Shimizu will leave his job in the department-store business next year, one of some 5.4 million Japanese boomer employees who will reach the standard retirement age of 60 over the next three years.

The retirement of the boomers, which kicks off this month with the start of the fiscal year, is a signature event for Japan, symbolizing a rapidly aging society, a looming fiscal crunch and the emergence of a roaring "gray economy" fueled by free-spending retirees.

The effect of mass retirements is expected to be limited at first, but the debate — which to some extent mirrors the one in the U.S. over Social Security and longevity — is in full swing, and the retirement age is already edging up.

It has demographers and social scientists worried. The retirement wave coincides with a rise in average age and a looming drop in the size of Japan's labor force.

The graying of Japan has far-reaching implications for its social structure and economics. Some companies are bracing for the loss of key retiring employees, while others are adapting to the changes. Mobile-phone companies are putting larger numbers on dials and screens, while other companies are making devices to safeguard, entertain or monitor the elderly.

Experts are focusing on the downside, including the loneliness of retired men yanked from their office-based social circles and rising pressure on workers to pay for social security for the elderly.

As the birthrate stagnates and longevity increases, Japan's average age climbs rapidly. In 2005, the Japanese average age was 43 years old, but it will soar to 55 by 2050, said Atsushi Seike, an expert in labor economics at Keio University in Tokyo.

The National Institute of Population and Social Security forecasts that Japan's population will fall from 127 million people today to 100 million people by 2050.

That means ever fewer workers paying into a pension system to support a growing population of retirees, putting huge burdens on the system.

Savings are high in Japan, and individuals over 50 hold 80 percent of the country's $13.1 trillion in personal assets. But Japanese retirees will depend on federal pensions for two-thirds of their retirement income.

Rather than amble softly into retirement, workers do so with anxiety.

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"In Japan, a traditional family system in which children take care of their parents has broken down," said Takeo Ogawa, an expert on rural aging at Yamaguchi Prefectural University. "We can't keep young people in the rural areas."

Japan's baby boom refers to a sharp jump in births from 1947 through 1949. That jump left a demographic bulge that experts say will force millions of Japanese baby boomers into retirement in the next three years.

Much of Northeast Asia is confronting low birthrates and rapidly aging populations. South Korea now has the lowest birthrate in the world, and China's population of people age 60 and over will climb from 144 million today to 300 million by 2026.

Because of social factors, Japan's situation is unusual. Urban employees usually have very strong ties to their workplaces but not necessarily to their communities.

A survey in 21 countries for the Organization for Economic Cooperation and Development found Japanese men to be the loneliest in the world.

The survey found that 16.7 percent of Japanese men rarely or never have contact with friends, work colleagues and other acquaintances in places of worship and in sports and cultural associations.

"Most of them still think of the company as their big family. This tie will be cut once they retire," said Shigeyoshi Yoshida, executive director of the Japan Council on Aging, an advocacy group.

Last year, the government started requiring companies to gradually raise the retirement age to 65 or find other work for aging employees. The qualifying age for pension benefits will also slowly increase from 60 to 65 to keep the system solvent.

Already, more than 20 percent of the population is 65 or older, and that will rise to more than 30 percent by 2050. Boomers account for an estimated 8.6 percent of the work force — and their sudden disappearance from Japan's offices and factories would be a blow to the economy at a time when the overall labor force is shrinking.

"This has spurred concern about the loss of laborers, but also the loss of a highly skilled, highly capable group of workers," said Seike, the Keio University economist.

Planners expect more than half the boomers to stay productive well past 60, and the government won't hazard a guess as to how many will retire this year. But Nippon Life Insurance estimates 1.12 million will leave the work force over the next three years.

Although that's less than a quarter of the over-60 workers, Japan's boomer-retirement wave is coming much harder and faster than America's.

"The U.S. has a healthier economy, a growing population aided by immigration, and retirement institutions like Social Security that although now are under pressure, could be strengthened by small modifications," he said. "That is not the case in Japan."

But Japan has an advantage: It has a long-term-care program and "everyone has a pension," said John Rother, policy director at AARP.

"What's obvious is that we're going to have to spend more on health care."

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