Income From Japanese Retirement Accounts Seen Declining - NRI/Cerulli Study

Tom Burroughes Group Editor 7 December 2015

Income From Japanese Retirement Accounts Seen Declining - NRI/Cerulli Study

A joint study explores the likely path of Japanese citizens' retirement income positions.

A study of Japanese households – a market traditionally tough for foreign wealth managers and banks to penetrate – says their income from lump-sum retirement benefits will likely fall as the Baby Boom cohort of the population ages.

A report by Nomura Research Institute and US-based Cerulli Associates estimates that households will pull out of Japanese government bonds (JGBs) by the order of around $48.9 billion per year for the next five years, a disinvestment rate likely to gyrate in response to shifts in interest rates.

"Including both proceeds from maturing JGBs and lump-sum retirement benefits, households will have up to ¥23 trillion (around $186 billion) available to annually invest over the next five years," says Sadayuki Horie, senior researcher at NRI.

Extrapolating trends dating back several years, NRI estimates that ¥18 trillion will flow into ordinary bank deposits annually. Meanwhile, risk assets' average share of household financial asset inflows over the past five years was 20 per cent to 30 per cent, most of which went into equity investment trusts.

"If this share remains unchanged, risk assets will see annual inflows of around ¥5 trillion over the next five years," notes Yoon Ng, Asia research head for Cerulli Associates.

Japanese savers have been traditionally risk-averse, preferring JGBs to equities and foreign assets, possibly in reaction to the traumatic stock market crash of the early 1990s.

The findings come from a report called Asset Management in Japan 2015: Capturing Rising Foreign Interest.


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