Business

Private wealth in Japan

15yrs of deflation with low GDP growth, but still the 3rd largest total wealth in the world?

Japan’s total household wealth (including debt) is the 3rd largest of the world, following U.S. and China (‘Global Wealth Databook 2018’ by Credit Suisse).

It’s no surprise, as Japan has also been 3rd largest in GDP(nominal, 2018) global ranking for the past 10 years.

However, it becomes an intellectual jaw-dropping adventure when you mix the fact with over 15yrs of deflation, zero/negative interest-rate, quantitative easing, and credit easing. The GDP growth is just managing to keep positive; a lower single digit or less than 1% for the past few years.

How did Japan’s household manage to keep ‘deflation’ away from it’s assets?

The sum of financial assets held by household in Japan was 1,835tln yen (or approx US$16.7tln), as of Mar’19.

The surprising fact is that 53% of it is in ‘Cash & Deposit’, and 28% in ‘Insurance, Pension, Standardized Guarantee Scheme’. With the negative interest rate as an exception, 81% of financial assets are invulnerable to the deflation or capital loss. This orientation have been the case for over 20 years now.

The mystery still remain, as to whether private individuals “chose” to keep their asset in such state anticipating the continuance of ‘deflation’, or the lack of investment in ‘risk assets’ became the reason of low GDP & deflation; the causality dilemma.

What’s next? Are Japanese really that ‘conservative by nature’? … will be explained in the next article…

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