Japanese households creep towards riskier investments as total assets shrink

[TOKYO] Japanese households put more money into stocks and mutual funds in the January to March quarter but the value of their assets fell for the first time in more than five years due to a stronger yen and weakening stock market, data showed on Friday.

The Bank of Japan data showing tentative signs of a move towards riskier assets is a first glimpse into the movement of funds in Japan since the central bank announced its negative interest rate policy in January.

Total household assets fell 0.6 per cent to 1,706 trillion yen (S$21.99 trillion) from the same period a year earlier as the value of investments in riskier assets such as mutual funds declined. Cash deposits grew 1.3 per cent to 894 trillion yen.

The value of investments in mutual funds dropped 3.7 per cent to 92 trillion yen, the first fall in four years. Assets held in stocks fell 9.9 per cent to 153 trillion yen, their steepest fall since the height of the global financial crisis in 2009.

Household assets include cash, bank savings, foreign currency savings, stocks, investment trusts, pensions, insurance and overseas securities.

The BOJ attributed the fall in household assets to a stronger yen and weaker stock market. The Nikkei average lost more than 9 per cent in the first three months of the year, as low oil prices and growth fears stalked investors.

"Risk-taking activity has been limited," said Takuji Aida, chief economist at Societe General Securities in Tokyo.

"But households are thinking that yield levels are too low, so there has been some movement from cash to investment."

The BOJ's negative interest rate policy, designed to force yields and other interest rates lower, took effect in mid-February.

Cash inflows to stocks and mutual funds totalled 614 billion yen between January-March versus net outflows of 239 billion yen the previous quarter, suggesting that some Japanese savers are testing the waters of investments in higher-yield assets.

However, the falling value of household assets means savers have less money to spare for investments, Mr Aida said, adding it was too soon to draw any conclusions on the role played by negative interest rates in the slight shift towards riskier assets.

In February, the BOJ started charging commercial banks 0.1 per cent interest on a small portion of reserves they keep at the central bank in a bid to stimulate lending and meet its 2 per cent inflation target.

Negative rates do not apply to savings deposits for households, but it initially sparked a lot of concern among individual investors about how to save and invest.

The BOJ is also buying government debt at an annual pace of 80 trillion yen as part of its quantitative easing programme.

When BOJ governor Haruhiko Kuroda launched quantitative easing in early 2013, he said one aim of monetary policy was to encourage portfolio rebalancing.

But the BOJ's data showed little progress in getting corporate Japan to use its cash reserves for investment.

Cash and savings at non-financial companies rose to a record high of 261 trillion yen in January-March.

REUTERS