Japan’s household financial assets experienced their first decline in eight quarters as of the end of September 2024, according to data released by the Bank of Japan (BOJ). The total value of household financial assets stood at ¥2.18 quadrillion, a decrease from the record high set just three months earlier.
The decline was attributed to a drop in stock prices following the BOJ’s decision in July to raise interest rates, coupled with the weakening of the yen. Despite this quarterly fall, the balance of household financial assets showed a 2.8% increase compared to the same period the previous year.
In the second quarter of 2024, household financial assets had surged to new heights, driven by the introduction of the new NISA tax-exempt investment program for small investors and rising stock prices. However, as of September, the overall decline reflected a mix of factors, including market corrections and macroeconomic shifts.
Breakdown of Household Financial Assets
Stockholdings: Shareholdings increased by 7.2% year-on-year, reaching ¥285 trillion. This growth was a positive sign amidst broader market challenges.
Investment Trusts: Investment trusts saw a notable rise of 23.3%, totaling ¥125 trillion, continuing their upward trajectory from earlier in the year.
Cash and Deposits: The balance of cash and deposits grew modestly by 0.3%, amounting to ¥1.12 quadrillion. However, cash holdings saw a significant decrease of 3.1%, dropping to ¥102 trillion, marking the largest-ever decline. This reduction is largely due to the increasing adoption of cashless payment systems and households dipping into savings to offset higher prices.
Government Bonds and BOJ Holdings
The BOJ’s holdings of Japanese government bonds (JGBs) stood at 52.64%, marking a decrease for the fourth consecutive quarter. This decline is in line with the central bank’s efforts to normalize its monetary policy, which has included reducing JGB purchases since August.
Outlook
Despite the recent decline, Japan’s household financial assets have generally shown resilience, particularly in the context of long-term growth trends. The shift away from cash savings towards other forms of investment, such as shares and investment trusts, reflects changing financial behaviors, particularly among smaller investors benefiting from tax incentives.
However, with the BOJ’s ongoing efforts to wind down its extraordinary monetary policies and the challenges posed by the weakening yen and global market fluctuations, Japan’s household financial asset growth could face more volatility in the coming quarters.
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