Japan's elder power: most Western CEOs have yet to discover the nation's imminent spending boom.

For centuries, Japan's elderly have obeyed the societal dictum "When one gets old, be of service to one's children" and surrendered their life savings to sons and daughters as death approached. These oldsters were seen as offering little value to society. The only thing they could count on was whiling away the hours playing shogi (chess) and go (a strategy game).

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But today, the Japanese elderly's perception of how they should spend their money and pass their time is undergoing a quiet revolution. Increasingly, their attitude is that they should spend as much as they like and not worry about leaving savings to the next generation. "I would not want to leave any more than the absolute necessity for my daughters because they are not likely to care for my wife and myself," says Fujio Ando, senior managing director of Chiba Bank  Asset Management. There also are tax reasons: Assets valued at more than 40 million yen ($380,000) to be passed on to each of his daughters are subject to a 50 percent inheritance tax. "Why bother saving money and then pay half of it in tax?" says Ando.

The implications of this shift in attitude are huge. Japanese age 55 and over account for as much as 60 percent of the nation's consumer spending and hold 75 percent of its incredible $14 trillion in net assets, with their average assets amounting to as much as 70 million yen ($686,000) per person. Because Japan's rate of aging will make it the world's most elderly nation over the next two decades, how this cohort spends money will be so significant that it could bolster Japan's overall economic growth rate.

This trend will be sustained for many years because the first generation of postwar baby boomers, born in 1947, will start retiring in earnest in 2007. "It is the largest single consumer market, dwarfing all others," says the author Taichi Sakaiya, who is a former director general of the nation's Economic Planning Agency.

The older generation's spending--perhaps hundreds of billions of dollars--also could prove to be so significant that it attracts the attention of Western chief executives, many of whom have opted to bypass Japan to invest in younger, faster-growing markets elsewhere in East Asia. A few forerunners among U.S. companies already have seized on this market and are poised for future growth. The group includes Citigroup and AIG in the financial sector, Merck and Pfizer in pharmaceuticals, and Harley-Davidson.

"American companies will be very foolish if they do not follow Japan's elderly market," advises Debbie Howard, president of both the American Chamber of Commerce in Japan and the Japan Market Resource Network, a consulting group. "I tell my clients to target the fifties and above for financial products such as stocks, bonds, mutual funds and others, health-care products like blood pressure and diabetes testing devices, pharmaceuticals and many, many other foreign products that are not available in Japan." At her urging, one of her clients, McLean, Va.-based Sunrise Senior Living, will soon be bringing its assisted-living services to Japan.

Predicting what Japanese seniors will spend on isn't easy. But clues can be derived by visiting the glitzy Mitsukoshi department store in Tokyo's Nihonbashi district. This 330-year-old retailer is known for catering to the affluent elderly. Getting out of chauffeur-driven cars or driving their own, the elders in expensive clothing snap up Louis Vuitton accessories, Rolex watches and toys for their grandchildren before heading into one of the pricey restaurants on the top floor of the store's new wing. "Our sales to senior customers rose during the recession of the past few years, but now they are getting even better," a Mitsukoshi official says.

It is much the same story in the historic Jizo-dori bazaar in Sugamo, in northern Tokyo. There, a slightly less affluent crowd buys herbal medicine, odor-free garlic, rice cakes and green teas.

The vast majority of seniors who are in their early sixties, or baby boomers who are right below that age bracket, are image-driven and fashion-oriented. The adventurous fancy motorcycles made by Honda, Yamaha, Kawasaki and Harley-Davidson cost more than compact cars. In fact, for Harley-Davidson Japan, they are the customers too important to ignore: Harley riders over 40 years old account for as many as one-third of its sales, and many are easily over 55, says Hirofumi Fujiwara, deputy general manager of marketing at Harley-Davidson Japan.

Young seniors also spend big on cars. Since its launch in December 2003, Toyota's all-new Crown, which has long been known as the last car people own before giving up driving, has been a solid success, with monthly sales of about 8,000 cars. Acura's new Legend, powered by a novel all-wheel-drive system, also has seen better-than-expected sales since its introduction in October. In both models, core buyers are those in their late fifties and above. At the Tokyo Motor Show for commercial vehicles in November 2004, handicapped-assisting vehicles exhibited by all Japanese makers were a big draw among older attendees.

The elders and near-elders also are loosening their purse strings for wellness, hobbies, health and nursing care. Simply put, they're doing things they wouldn't have dreamed of a decade ago. Seventy-year-old Shigeru Terashima, known by his stage name, Kasane Nakajo, debuted as a professional singer three years ago when he was 67. "It was my life's dream," says Terashima. The 71-year-old Yuichiro Miura, a well-known adventurer and skier, was even more daredevilish--becoming the world's oldest person to climb Mount Everest.

Other elders are spending time--and money--on travel, the arts, health food, athletic equipment, cameras and PCs, according to the Hakuhodo Institute of Life and Living's Elder Business Office, the research arm of Japan's second largest advertising agency.

Come 2007, when the first boomers retire, young seniors will become the largest class of consumers, totaling as many as 10 million. Their attitudes are different in part because they tasted an affluence that previous generations never did. "We were raised when Japan's first economic boom began and, though poor, we were given the chance to play music, enjoy entertainment, and many of our families began buying television sets, motorcycles and cars," Hikaru Hayashi, executive director of the Hakuhodo Institute, recalls. "In other words, we were trained how to enjoy life, which is going to be what most of us will do when we join the elder class."

Shrinking family size is another piece of the story. It's not uncommon for a Japanese couple in their fifties to have three or four siblings still alive. But in the next generation, there may be only one or two children who stand to inherit huge wealth. Elders don't have to worry about them. "If you have only one child, you do not need to leave much to him or her," says Rei Masunaga, chairman of the Bank of Japan's Central Council for Financial Services Information. And Japan's national pension, health care and elderly nursing care insurance services seem certain to endure.

Western CEOs who can figure out how to ride Japan's aging wave clearly will be winners. But to the chagrin of Detroit's Big Three, which have carved out only scant positions in Japan, one major winner could be Toyota. Tatsuro Toyoda, the automaker's former president and an elder himself, suffered a debilitating stroke several years ago. But he instructed his minions to develop cars that are friendly to the handicapped. Result: the company's "Welcab" series of vehicles for the handicapped and elderly. Detroit's competitive products? Nowhere to be seen.