Japanese savers move money out of banks as bonds prove more attractive
Household holdings of government bonds account for less than 1% of their financial assets
Japanese savers are reallocating their funds from bank accounts to government bonds as the latter prove to be more lucrative. Government bonds previously yielded next to nothing, but now offer four times the interest rates of bank deposits. With the Bank of Japan's policy of near-zero interest rates ending, the shift towards bonds has gained momentum.
Takashi Kamachi, a 46-year-old businessman in Osaka, moved 600,000 yen from his son's savings, held in a Japan Post Bank account, into retail government bonds, citing higher returns.
Retail Japanese government bond sales have nearly doubled compared to the previous year, with monthly sales surpassing 1 trillion yen over the last three months. The rising bond yields have made households more sensitive to returns on their money, prompting some to shift a portion of their US$7 trillion in financial assets out of bank deposits. Kenji Nakanishi, a senior lawmaker and supporter of expanding retail ownership of government bonds, emphasized the need for a stable buyer base for Japan's budget.
Despite the Bank of Japan's efforts, commercial banks have maintained low deposit rates, offering around 0.5 per cent on one-year deposits, which are insufficient to beat inflation. In contrast, retail notes and 10-year bonds provide coupons above 2 per cent. Japanese households hold roughly 2.5 quadrillion yen in financial assets, with cash and deposits accounting for 1.13 quadrillion yen.
However, household holdings of government bonds make up less than 1% of their financial assets, compared to roughly 2% for US households' holdings of Treasury securities.
Japanese government bond sales in the April-October period have nearly doubled, reflecting growing interest among first-time investors seeking a safer alternative to bank deposits. Nonetheless, policymakers are concerned that a significant shift of funds into bonds could weaken banks' credit-creation function and affect their ability to supply growth capital to the economy.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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- Analysis:Japanese savers have rediscovered interest rates and banks are feeling it channelnewsasia.com
- Japanese savers move money out of banks as bonds prove more attractive businesstimes.com.sg
