Many of Jun Ogawa's friends frown on his playing the stock market, but he's not bothered.

The 68-year-old retiree has built up a nest egg to fund his hobbies -- skiing, cycling and overseas travel -- by investing in domestic stocks using a slice of his retirement payout.

It's because I invest that I have the means to enjoy retirement, said Ogawa, who has earned an average of 1.5 million to 2 million yen ($13,000 to $17,000) each year since retiring from an electronics parts manufacturer five years ago.

But Ogawa is not typical of Japan's 7 million baby boomers.

Many of them realize they must earn income from investments to supplement their pensions in order to live life to the full, but unlike younger investors most retirees park their savings in low-yielding bank deposits and opt for domestic government bonds and stocks over foreign currency deposits.

They are keenly aware of the need to invest to cover pension shortfalls, said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. They also can't tolerate losing even a penny from their retirement allowances.

Born between 1947 and 1949, they make up nearly 6 percent of the nation's population of 127 million.

They floated on the nation's bubble economy before it burst in the mid-1990s, and their careers wound down just as Japan's financial system crumbled under the weight of bad loans in 1998.

They are also the last generation benefiting from corporate Japan's generous retirement allowances and government pensions, which they will begin receiving when they reach 65. Their retirement packages are estimated to total around 50 trillion yen ($430 billion), with a portion seeking investments.

For many of them, daily living expenses are covered by average monthly pension income of around 120,000 yen ($1,000) per person per month, on top of savings and a hefty lump-sum retirement payment from employers.


Many younger investors took advantage of the recent sell-off in financial markets to pick up stocks and other risky assets on the cheap, but 59-year-old Hiroo Ban wasn't one of them.

Ban, who retired from a top-tier consumer electronics firm a year and a half ago, said he sat tight during the week that the Nikkei share average dived 9 percent to a one-year low.

It's very important to contain risk. Otherwise, it's bad for your heart, Ban said, adding that he would wait until markets calmed to decide whether to sell any of his stock and investment trust holdings or pick up new ones.

This generation is typically very conservative about asset management because they saw Japan's biggest banks fail and the economic bubble burst at the end of their careers, said Naoki Sugihara, a spokesman for Sumitomo Trust and Banking.

Financial institutions say products comprising sovereign debt or other fixed-income instruments offering returns of less than 7 percent find plenty of demand among risk-averse older investors.

Such returns are still far higher than the 1-1.5 percent coupons offered on retail-targeted Japanese government bonds.

They don't seem too eager to take the risk for higher returns as long as they are guaranteed around 5 or 6 percent, said Yasukatsu Kakuyama, assistant general manager in the marketing support division at Mitsubishi UFJ Asset Management.

Products with regular payouts to supplement pension payments and 10-year products that can be redeemed or reinvested are also popular.

Analysts say many baby boomers are knowledgeable about financial products but not all that informed about investing.

Many see investment trusts as middle-risk/middle-return, with the risk of the principal getting hurt and the very near-term return in regular payouts being separated, Kumano said. People feel safe by letting a third party manage their assets.

Kaz Okamoto at I-O Wealth Advisors laments that friends who have just retired often ask him for advice on how to invest their retirement payout. I tell them they should've started looking into that sort of thing 10 years ago, he said.


Data from the Central Council for Financial Services Information, a public entity, shows that about 57 percent of assets owned by individuals in their 60s and 70s are parked in bank deposits and savings, compared with about 51 percent for those in their 40s and 50s.

This is a generation that has considerable means and isn't pressed to think about financial planning, said Hiroshi Miyai, an executive managing director at Nikko Financial Intelligence.

Their abundant financial power helped boost the value of Japanese investment trust funds to 79 trillion yen ($680 billion) as of end-July, up more than 40 percent since 2005.

Full government guarantees on bank deposits ended that year, while Japan Post, the country's postal service which also runs the world's largest savings bank, started selling investment trusts, or mutual funds.

Meanwhile, foreign-currency-based investment trust funds jumped 75 percent, as the weak yen and higher interest rates abroad made it look easy to increase one's wealth.

Some analysts are doubtful the retirement generation will spur an explosive growth in investment trusts, seeing only a gradual shift in household financial assets out of deposits.

It's likely that Japan's very low interest rates are driving them to take risks they need not take, Miyai said.

Of the retirement generation, just 5 percent own financial assets of more than 100 million yen ($850,000), with the bulk, or 45 percent, in the range of 10-25 million yen ($85,000-$215,000), Miyai said.

Kumano said the number of retirees with a high savings ratio thanks to retirement allowances will peak around 2010, suggesting that the boom in the investment trust business could also start to peter out then.