Japan Households Still Risk-Shy

Only 30% of Japanese households have experience investing in stocks and nearly 80% say they would not take on risk even for an investment yielding significant returns, a survey showed, underscoring the difficulty of reversing the risk-aversion widely blamed for prolonging Japan’s chronic deflation.

One of the key goals of the Bank of Japan’s aggressive monetary stimulus program, deployed in 2013, was to prompt households to shift money away from deposits and into investment by building public expectations that inflation would accelerate, Reuters reported.

A survey by public entity, the Central Council for Financial Services Information, found that in addition to only 31.6% of households saying they have invested in stocks, only 17.3% said they had invested in foreign currency-denominated assets.

Asked whether they would invest 100,000 yen ($972) if there was a 50% chance of producing a 20,000-yen gain after a year and the same probability it would produce a 10,000-yen loss, 78.6% said they would not invest, the survey showed.

“The survey illustrates some of the characteristics of Japanese households, one of which is their strong risk aversion,” said Noriaki Kawamura, the council’s director and head of a Bank of Japan group in charge of promoting financial education.

“They also tend to be more cautious and steady in their money management compared to US and European households,” he told Reuters on Friday.

The poll of 25,000 households conducted from February 29 to March 17, is the first most comprehensive survey in Japan on financial literacy and households’ investment behavior. The English version of the survey was released this week.

The survey is part of policymakers’ efforts to enhance financial literacy in Japan, which lags behind the United States and Europe, and encourage households to avoid hoarding cash and accept more risk.

The BoJ acts as a secretariat of the council, which conducts surveys and financial education programs.