Japan macro-strategy:The Affluent Elderly

It is time to rotate from “global cyclicals” to domestic opportunities: theglobal industrial recovery is in the process of peaking, and consensus earningsforecasts for TOPIX have already rolled over.

Japan’s affluent elderly (household head over 65 years old with the householdincome over US$50,000 pa) is a massive market that will continue to grow. Theaffluent elderly are approximately 20% of Japan’s population and 30% of annualconsumption. Their total income is equal to about half of Italian GDP.

We believe the above leads to demographic opportunities related to increaseddiscretionary expenditures e.g. luxury goods, remodelled homes, and increasedwellness & health expenditures: from skin care and nutritional supplementsthrough to medical expenses:In line with our strategic focus on high ROEs, some stock ideas are highlightedbelow. More comprehensive tables of companies exposed to the theme are onpages 5-7.