Persistent inflation in Japan appears to have convinced a growing number of households to reconsider a decades-long tendency to hold most of their assets in cash, central bank data show.
The share of stocks and mutual funds in the ¥2.19 quadrillion ($13.7 trillion) of household assets rose to 19.7% at the end of March, an all-time high, Bloomberg calculations based on the Bank’s quarterly figures show of Japan that were published on Thursday.
While the increase was mainly driven by a rise in asset prices, a rise in trading was responsible for around a quarter of the 31.5% rise in investment trusts.
Assets in stocks and investment trusts both reached record highs, totaling ¥432.5 trillion.
Households have experienced a sharp increase in inflation over the past two years, a significant shift after a prolonged period of deflation accompanied by very low interest rates.
Because the cost of living was generally stable or even lower, individuals tended to keep their financial assets in savings or cash.
While the cash-to-deposit ratio still accounts for a large share of total assets, it has fallen to 50.9%, the lowest level since December 2007, according to BOJ data.
“Japanese, especially the younger generation, are becoming active in investments because of inflation,” said Junki Iwahashi, senior economist at Sumitomo Mitsui Trust Bank.
“The increasing recognition of inflation is positive news for the BOJ in its efforts to anchor price expectations, but without wage growth catching up, there is a risk that consumer spending will remain weak.”
