A recent post at Economist.com speaks to the nice fit reverse mortgages might make for Japan, given a very serious retirement crisis confronting that country:

Japan faces an oncoming [tag]pension crisis[/tag] that will make the US position look enviable. The average Japanese lives longer and has fewer children than an American, and consequently faces a longer retirement and less young workers to pay for it. The long recession and depressed asset prices have left many elderly Japanese with fewer resources to fund their retirement.

Presumably, Japan could benefit a great deal from reverse mortgages. Older Japanese have a large fraction of their wealth tied up in their homes….A common reason for reluctance to take on a reverse mortgage is the desire to bequeath something to the children. Since the average Japanese retiree has fewer children, they need not worry so much about leaving wealth behind.

Soon after reading this I coincidentally happened upon a research report from 2001 that noted there was little liklihood of a successful reverse mortgage market developing in Japan:

…more traditional, family-oriented areas are less likely than others to show interest in reverse mortgages. This idea may be extended to the international level. For example, the [tag]reverse mortgage market[/tag] is unlikely to thrive, at least any time soon, in such countries as Japan, where intergenerational bonds traditionally are strong.

So, which will it be? Widespread acceptance by cash-strapped Japanese seniors or, indignant avoidance of reverse mortgages by proud elders who place greater value on leaving a bequest than on personal needs?

We will soon findout. It’s been reported at Economist’s View that Japan will embark on a state-run reverse mortgage program in early 2007. My guess is that the Japanese will view reverse mortgages the same as many Americans do - a good tool to use as a “last resort”. If Japan’s retirement crisis proves as serious as noted, the market for reverse mortgages will be fertile as it is now proving to be in the US.

But in any case, it will be interesting to watch this program develop.

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