Fund managers are increasingly confident the pickup in Japan's economy is part of genuine economic revival and not another blip in the country's decade-long bout with recession and deflation.
The view was bolstered last week by news that Tokyo land prices recorded their first increases, measured on a six-month basis, since the collapse of the bubble economy in 1989. Higher property prices point to a return of inflation, fund managers say. This could be a catalyst to trigger US$2.9 trillion out of low-yielding postal savings and deposit insurance and drive an equity bonanza.
Helping to divert those funds into stock and bond markets, three fund houses will begin distributing products directly through 1,330 post offices in the coming year, as part of reform packages recently introduced by the Koizumi administration. Banks have also recently started selling equity funds, broadening access to the investment products which were previously only available through brokerages.
Koichi Ikegami, spokesman for Nomura Securities, one of the groups authorised to distribute investment products through the post office, believes it signals an important turning point for risk-adverse Japanese investors. Long accustomed to parking cash in near-zero interest bearing accounts, access to the new investment products should encourage asset diversification.
Expected to be popular are foreign currency bonds which yield well above Japanese sovereigns, but investors are also searching beyond fixed income. 'As Japan's society ages, we look for semi-enforced savings for home acquisitions to shrink, stimulating new demand for risk assets,' says Mr Ikegami, adding that rising dividend payouts are an attractive source of income for babyboomers about to retire. Nomura equity funds are attracting roughly 1 billion yen in new funds every month.
Japanese companies are paying out more earnings as dividends, and are quickly approaching a threshold where they will exceed bond market yields.