Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry
Transcript
- Lucas: Japan's population of children under fifteen has been shrinking for forty straight years. It hit another record low in April — about fourteen point one million kids, down roughly three hundred thousand from last year. Luna: And yet the Japanese toy industry just posted its highest-ever annual sales. Nine point eight billion dollars in 2025, beating the previous record set in 2024. Lucas: That's the puzzle. Fewer children should mean fewer toys sold. But what's happening is a shift in who buys them. The Japanese market is being carried by adults buying toys for themselves. Luna: There's a term for it in Japan — 'otona no omocha,' literally 'adult toys.' But it doesn't mean what you think. Lucas: Right, it's not that kind of adult toy. It's things like high-end model kits, collectible figurines, complex puzzles, and Lego sets that cost two hundred dollars and sit on a shelf. The industry calls these consumers 'kidults.' Luna: Kidults — people aged roughly eighteen to thirty-five who spend disposable income on the toys they couldn't afford as kids, or on new hobby-grade versions of classic products. Lucas: According to the Japan Toy Association, the kidult segment now accounts for over forty percent of the domestic toy market. That's up from maybe twenty percent a decade ago. And it's growing while the traditional kids' segment is flat or declining. Luna: The poster child for this is probably Bandai Namco and their Gundam model kits. Gundam is a forty-five-year-old anime franchise about giant robots. The plastic model kits are intricate, require assembly, and can cost anywhere from fifteen to five hundred dollars. Lucas: Bandai Namco reported that sales of its Gundam model kits rose eighteen percent year-over-year in their last fiscal year. Global revenue from the category hit about one point two billion dollars. And the core buyer isn't a ten-year-old — it's a man in his thirties or forties who watched the original show as a child. Luna: Lego is another example. They've been pushing toward adults for years now. Their botanical collection — the orchid set, the succulent set — those are explicitly marketed to adults. They even have a Lego 'Adults Welcome' campaign. Lucas: The botanical collection launched in 2021 and it's been one of Lego's fastest-growing product lines. The target audience is women aged twenty-five to forty who might not have bought Lego since childhood. The sets are designed to look good on a coffee table, not just on a bedroom shelf. Luna: And they're expensive. The Lego Titanic set is six hundred and eighty dollars. The Colosseum is five fifty. These aren't impulse buys for a kid — they're statement purchases for an adult with discretionary income. Lucas: The question is why now. Why are grown adults spending a significant portion of their disposable income on toys? I think there are a few forces converging. Luna: I'd start with nostalgia. The generation that grew up with the first wave of anime exports, or with classic Lego sets, is now in its thirties and forties. They have money, and they want to reconnect with that childhood joy. Lucas: Absolutely. But I'd add stress relief. There's a growing body of research showing that hands-on activities like assembling a model kit or building a Lego set reduce cortisol levels. It's a form of active meditation. Adults are paying for that mental break. Luna: And then there's the collectibility angle. Limited-edition releases, exclusive drops, the whole FOMO mechanism. It's essentially the same model as sneaker culture, just applied to toys. Lucas: Bandai Namco releases limited-run Gundam kits that sell out in hours. On the secondary market, some rare kits go for ten times their retail price. That turns a hobby into an investment — or at least a speculative asset. Luna: The broader lesson for other industries is that a shrinking child population doesn't have to mean shrinking revenue. You can pivot your product and your marketing to adults. But it requires fundamentally rethinking who your customer is. Lucas: One cautionary note though. The kidult strategy works best for products that already have nostalgic brand equity. A new toy brand trying to break into the adult market without that built-in emotional connection — that's much harder. Luna: So established brands have a moat. But that also means the window for building that moat is closing. If you're a toymaker today without a strong heritage franchise, you might struggle to capture the adult dollar. Lucas: Japan's experience also highlights something about the broader economy. When a society ages and birth rates fall, consumer spending shifts from child-oriented goods to experiences and hobbies for adults. We see it in travel, in dining, and now clearly in toys. Luna: It's a mirror of what happened in Japan's alcohol industry. When young people stopped drinking as much, distilleries pivoted to premium shochu and whiskey aimed at older connoisseurs. Same demographic pressure, different product. Lucas: And that pivot worked. Japanese whiskey exports have grown something like tenfold in the last decade. Suntory and Nikka are global brands now. But they had to stop trying to sell cheap whisky to young people and start selling expensive whisky to adults. Luna: Toy companies are doing exactly that. They're raising prices, adding complexity, and marketing nostalgia. And it's working. Lucas: Let's zoom out a bit. The global toy market is about one hundred billion dollars. Japan is roughly ten percent of that. But Japan's demographic profile is where much of the developed world is heading. South Korea's fertility rate is even lower. Much of Europe is below replacement. Luna: So what's happening in Japan's toy market today could be a preview for the U.S. and Europe in ten or fifteen years. Lucas: Exactly. Mattel and Hasbro are already watching closely. Mattel has been pushing adult-focused collaborations — the Monopoly: Stranger Things edition, Uno with designer card backs. Hasbro has the 'Ages 8 and Up' branding on some games, but they're really targeting thirty-somethings at game nights. Luna: Speaking of watching closely — and this is something I think about a lot — the reason we can dig into these shifts is that the show is supported by listeners who find value in it. If walking through the economy with us has made something click, a handful of listeners already chip in monthly through buy me a coffee dot com slash fexingo. That's what keeps this ad-free and lets us spend time on episodes like this one. Lucas: Yeah, it's a pretty small group, but it genuinely funds the whole operation. No ads, no sponsors — just people who want to understand how the world actually works. Luna: And we really appreciate it. Okay, back to toys. One more trend worth noting: the rise of 'kidult' experiences tied to toys. Not just buying a product, but paying to build it in a social setting. Lucas: There are now Lego building workshops for adults in Tokyo and New York that cost fifty dollars a session and sell out months in advance. Bandai Namco runs Gundam assembly cafes where you build a kit and have a drink. It's part retail, part experience economy. Luna: That's a smart hedge too. Even if the physical product eventually saturates, the experience component has a different ceiling. People will pay for the memory as much as the object. Lucas: So the toy industry's response to falling birth rates is really a masterclass in adaptation. They didn't try to reverse the demographic trend — they accepted it and changed who they sell to. Luna: They're selling nostalgia, stress relief, and community. And in a world where adults are more anxious and more nostalgic than ever, that's a surprisingly durable business model. Lucas: Japan's toy record is a reminder that a shrinking pie doesn't have to mean shrinking slices — if you're willing to cook a different meal.