JAPAN: JAPANESE HOUSEHOLDS WITHOUT SAVINGS CLIMB TO MOST SINCE '63

Japanese Households Without Savings Climb to Most Since ’63

By Andy Sharp & Chikako Mogi - Nov 7, 2013 8:15 PM PT

The share of Japanese households with no financial assets rose to a record as falling incomes forced people to dig into their savings, highlighting the potential for widening disparities under Abenomics.

The proportion reached 31 percent, according to a Bank of Japan survey released in Tokyo yesterday, up from 26 percent a year earlier and the highest since the poll began in 1963. The BOJ surveyed 8,000 households of two or more people aged 20 years or older from June 14 though July 23.
Enlarge image The Sun Sets behind Buildings in Tokyo

Already facing declines in wages, households will be hit in April by a consumption-tax increase intended to shore up Japan’s finances. Photographer: Tomohiro Ohsumi/Bloomberg
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Nov. 7 (Bloomberg) -- Thomas Byrne, Singapore-based senior vice president for sovereign risk at Moody’s Investors Service, talks about Japan's economy and government policies. Byrne also talks about Indonesia and China. He speaks in Hong Kong with Mia Saini on Bloomberg T elevision's "First Up." (Source: Bloomberg)

Prime Minister Shinzo Abe needs to convince companies to drive up workers’ pay, so that he can sustain an economic recovery jump-started by fiscal and monetary stimulus and maintain public support. Already facing declines in wages, households will be hit in April by a consumption-tax increase intended to shore up Japan’s finances.

“It’s critical that Abe succeed in convincing corporates to raise wages,” said Izumi Devalier, a Hong Kong-based economist at HSBC Holdings Plc. “Lower-income households may come to feel they’re getting the short end of the stick from Abenomics.”

Among households whose assets fell, 40.9 percent said that declining regular income forced them to draw down their savings -- the top explanation. Japan’s salaries extended the longest slide since 2010 in September, with regular wages excluding overtime and bonuses falling 0.3 percent from a year earlier, a 16th straight drop.
’Grim’ Situation

The Topix index fell 0.9 percent at 1:12 p.m. in Tokyo today, headed for a one-month low as stronger U.S. economic growth fueled bets the Federal Reserve may cut stimulus sooner than expected. The yen was little changed at 98.10 against the dollar.

“The survey shows a grim wage situation,” said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Now some companies are hinting at higher salaries so we may see a better result next year.”

The deterioration in household financial strength serves as a reminder of Japan’s challenges just as concerns rise that the Abe administration will limit the magnitude of structural reforms in its self-described growth strategy.

The health ministry this week decided that a bill on Internet sales of over-the-counter drugs should exclude certain medicines. This drew criticism from Hiroshi Mikitani, the billionaire head of online retailer Rakuten Inc. (4755), who said Nov. 6 that he would take legal action if the legislation becomes law, and leave a key government panel on industrial competitiveness.
’Major Reversal’

Robert Feldman, head of Japan economic research at Morgan Stanley MUFG Securities Co., said the health ministry’s decision is a “major reversal for Abenomics.”

“Without quick and decisive leadership from Abe himself, there is a higher risk that Abenomics will fail,” Feldman wrote in an e-mailed note yesterday. “Markets could start to reflect this risk soon.”

The policies dubbed Abenomics have weakened the yen, boosted exporters and fueled an almost 60 percent gain in the Topix Index in the past year.

Even so, income disparities could widen. Households with financial assets saw their average value increase to 16.45 million yen ($167,000) from 15.39 million yen a year earlier, the survey showed. Stocks accounted for 8.3 percent of assets, up from 5.6 percent in 2012.

The average value of financial assets held by all Japanese households fell to 11.01 million yen from 11.08 million yen.

Households appear to be less interested in deposits and more interested in risk assets, Nomura Securities Co. analysts said in a report on the data yesterday.

“That said, their interest in risk assets is still lower than in 2000 or 2005–07, when the equity markets were strong, and we think the increase in individual investors’ risk tolerance is in its early stages,” said the Nomura analysts led by Hiromichi Tamura.

To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net; Chikako Mogi in Tokyo at cmogi@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net