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Abenomics Cushions Households

Abenomics Cushions HouseholdsAbenomics Cushions Households

Japan’s household wealth rose to a record as Prime Minister Shinzo Abe reflates the world’s third-biggest economy, giving a cushion to consumers facing higher costs of living.

Household assets increased to 1,645 trillion yen ($15 trillion) at the end of June, up 2.7 percent from a year earlier, according to a quarterly Bank of Japan report released yesterday. Holdings in investment trusts climbed 15 percent to an all-time high of 82 trillion yen, Bloomberg reported.

Rising wealth from a buoyant stock market and a pickup in land prices may cushion households as an April increase in the sales levy fuels inflation that was 1.4 times wage growth in July. The challenge for Abe is to encourage consumers to use their savings -- still mostly parked in cash -- to bolster the economy as he considers raising the tax another two percentage points to 10 percent.

“Increasing household assets will help sustain Japan’s recovery,” said Hiroshi Miyazaki, an economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Consumers must be relieved with the increase in their assets, especially when their real incomes are dropping.”

The gains underscore progress in Abe’s effort to reflate the economy. Japan’s Topix share index rose 0.5 percent at 10:01 a.m. in Tokyo, gaining 56 percent since he took office in December 2012, as his handpicked governor at the Bank of Japan, Haruhiko Kuroda, pumps unprecedented stimulus that has helped weaken the yen and fuel corporate profits. The Japanese currency was down 0.1 percent at 108.82 per dollar.

 Land Prices

Land prices in Japan’s three largest cities -- Tokyo, Osaka and Nagoya -- increased for a second year in the 12 months to July 1 and residential prices in the areas increased for the first time in six years as low interest rates drove demand for properties, according to data released by the land ministry yesterday.

“Japan’s challenge is broadening the new investor base, given the prospect of population declines,” Kuroda said in Tokyo yesterday. “I expect there will be a clearer shift in investors’ risk appetite, which is currently centered on safe assets, once the deflationary mindset is wiped out.”

The increased asset values have yet to kindle strength in consumer spending. The Cabinet Office cut its assessment of the economy for the first time in five months, and lowered its view on consumer outlays, saying “private consumption appears to be pausing,” according to a monthly report released today.

 

Financialtribune.com