Japanese Households To Have ¥23 Trillion Available Annually For Investment

The income of Japanese households from lump-sum retirement benefits is likely to decrease now that the Baby Boomer retirement wave has crested.

However, lump-sum retirement benefits will remain an important funding source for investments in financial assets, and most of these retirement benefits will likely flow into investment products.

This is a key finding in a joint report from Cerulli Associates and Nomura Research Institute, Ltd (NRI) entitled Asset Management in Japan 2015: Capturing Rising Foreign Interest.

NRI also estimates that households will disinvest in retail Japanese Government Bonds (JGBs) to the tune of ¥6 trillion (US$48.9 billion) annually over the next five years. This disinvestment rate, however, is prone to vary substantially in response to interest rate movements.

"Including both proceeds from maturing JGBs and lump-sum retirement benefits, households will have up to ¥23 trillion 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%-30%, 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.

Asset Management in Japan 2015: Capturing Rising Foreign Interest is a collaboration between Cerulli Associates, a research firm specializing in global asset management and distribution trends, and NRI, a leading provider of consulting services and system solutions.

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