by Noriyuki Morimoto
The government is encouraging working people to build up assets for a comfortable retirement. However, the contradiction of this policy is that, as long as working people are saving money to prepare for a comfortable retirement in the distant future, this will inevitably have the effect of curbing their current consumption. In fact, rather than current thriftiness for future consumption, it may be that current consumption with the assumption of future thriftiness will contribute more to economic growth.
Thrift in industry can actually lead to a vicious circle. The attempt to reduce costs and the excessive retention of liquidity to prepare for a crisis can result in suppressed economic growth, and stronger efforts for thrift and crisis readiness can lead to an even larger need for thrift and crisis readiness.
Savings from improved efficiency in corporate management is meaningless if it is retained for crisis response; instead, it must be invested for future growth. This investment in the future, and the growth that it brings, is the essence of corporate management. In order to break the vicious circle, it is necessary to turn the uncertainty of the future from a dark anxiety to a bright possibility for growth in which businesses invest. When that possibility materializes as actual growth, the vicious circle will turn into a virtuous circle.
In the case of personal finance, what is needed is not to cut back on essential spending, but to eliminate unnecessary spending and streamline household finances. The surplus generated through streamlining should not be kept in a bank account to prepare for old age but should be invested in order to enjoy a comfortable retirement. When the invested funds grow and are used for rich consumption, the vicious cycle turns into a virtuous cycle.
That said, when we talk about investment, the most important investment is in ourselves. Investing in our personal growth means increasing our human capital and acquiring high expertise, which will enable us to earn more money, work longer, and live more comfortably. This is the true purpose of rationalizing household finances.
[Category /Growth Strategy]
Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.