Japan International Finance Conference’s Message: INVEST.
~ Thursday, October 26, 2023 Blog Post ~
I participated in Nikkei Forum’s “Frontiers in International Finance: Japan’s Pathway to Prosperity.” This virtual event was held last Tuesday, October 24, 2023 in Tokyo.
It is interesting to note that the primary message of the conference was for the Japanese people to INVEST. The speakers encouraged the public to start investing as young as 20 or 30 years old.
Savings was Japan’s growth driver for a long time. I learned that in general, Japanese retail investors are conservative and prefer putting their hard-earned money in savings deposit accounts over investing it.
Nevertheless, the panelists noted today’s wildly uncertain times can be a challenge to Japanese prosperity and ascension as a financial hub. For instance, the investment boom is staggering in China.
Today, this East Asian economic giant is much richer than Western countries. China is a super-saving, large economy in the history of the world and invests staggering amounts, which makes Japan’s peak savings quite modest. But the speaker affirmed that the financial turmoil in China is a risk to Japan and the rest of the world.
Besides the remarkable economic slowdown in China, a huge wildcard is at hand: The world economy as a whole has more debt. When there is a lot of debt and interest rates have risen, there is a much greater possibility of financial turmoil.
According to the International Monetary Fund, economic downturns put the world economy’s growth uncertain. These dismal realities are due to the unfolding terrible events in the Middle East, the continuation of the war in Ukraine, and the recent banking problems in the United States and Switzerland.
Sudden rise in oil prices reaching certain levels is also a concern, as well as people in extreme poverty rising. Hence, the speaker cited that the growth in the world economy is relatively weak.
Nonetheless, I learned from the Japan virtual conference that there is room to build and expand. Japan can achieve remarkable growth and transformation and its target of becoming a global financial center. I am applying these learnings to myself.
Being a conservative investor, there is room for me to build and expand my financial situation further. Surely, I can achieve stunning financial growth and transformation more and maintain my lifetime of financial security.
The following principles are the highlights of the Japan virtual conference:
1. Japan aims to become an asset management nation.
Prime Minister Fumio Kishida’s administration focuses on the asset management industry of Japan. The East Asian economic giant pursues achieving advanced asset management knowledge and profession.
One of the panelists in the virtual conference affirmed that the world has changed from no inflation to high inflation. In this scenario, it is really tough for retirees to deal with high-inflationary environment.
The panelist pointed out that today’s problems include geopolitical volatilities that demand countries to be more self-reliant. Huge uncertainties are present due to the conflicts in Ukraine and the Middle East. Meanwhile, India is taking its own path.
Moreover, the panelist cited that fiscal levels around the globe involve massive spending challenges and more debts and there are no easy solutions on those issues.
I gathered from the Japan international finance conference that while the global economy is slowing down, and there is a possibility of a recession. Japan’s market is at the crossroads of reform and transformation.
There is a shift from deflationary to inflationary mind. I also learned that since the “cash is king” mindset prevails in Japan, corporations and households have a lot of savings accumulated.
But today, there is high interest on investing due to the risk of inflation. During this difficult time, the money of savers and the amount of money deposited in banks are in a pessimistic or bearish scenario.
Japanese savers can no longer benefit in their savings unlike 20 years ago. They need to invest to protect their purchasing power.
Based on the panelists’ insights, since inflation has come in, yen savings deposits should be re-invested. Inflation is higher globally, so the speakers encouraged Japanese savers with yen sitting in deposits to increase their investments.
Consumers should have new income sources coming in as well. The speakers cited that investing in alternative assets reduce volatility and increase returns.
I gathered from the Japan virtual conference that financial institutions in the country will come up with the right product for the average Japanese saver. I learned that the Japanese market needs to attract domestic and international investors as it competes with other nations in global investment money.
In this manner, Japan can achieve its target of becoming an asset management nation. The country also needs to double the household asset income.
With investment and asset formation being the aim, the speakers cited that assets held by Japanese households is worth 215 billion yen and most of this money is savings.
As retail investors are increasingly focusing on investment, Japan is qualitatively and quantitatively expanding the variety of investment products. The Tokyo Stock Exchange’s new offering is the JPX 150, which is similar to the S&P 500 of the United States. The JPX 150 index will attract investment money locally and worldwide. The convenience of asset management can be improved using this new investment product.
The speakers at the Japan international finance event affirmed that deposits for individual savers and investors getting re-invested will spur growth in the economy. They encouraged Japanese consumers to become long-term investors as it is a sustainable path forward and a great chance to rebuild financially.
2. Japanese people are encouraged to shift from savings to investment.
In the Kishida administration’s asset management program, I learned that household financial assets held as financial deposits will be transformed into assets or direct investments to the capital markets.
Household savings will become solutions to social problems. New York Life Investments Asia chairman Jae Yoon encouraged the Japanese consumers to take advantage of higher yields by investing in yield-generating assets. He remarked that underinvestment capital base should be mobilized for purposes of investing.
The chief investment officer of the 180-year-old insurance company pointed out that deposits are underutilized assets that should be invested into something productive.
Japan’s asset managers are mostly a part of major financial groups. As Japanese financial institutions promote asset formulation, individual investors will engage in investments safely and with peace of mind. These consumers will benefit from several model portfolios prepared by asset managers.
The Japan virtual conference panelists remarked that they put themselves in the shoes of their customers. They allow their clients to choose the suitable investment portfolio for them.
The asset managers also said they ask their clients about the best asset allocation method they believe is the best for them. They gather a more detailed response for each customer.
The asset management experts affirmed the investment needs may be different among customers. Hence, they recommended retail investors to know their requirements and be more proactive by telling their advisers what they specifically need.
The panelists cited that the best advisors can motivate clients to invest and form assets for the long term. These finance professionals accompany retail investors in their journey of using the sophisticated or advanced investment products.
Mr. Hiroyasu Ando is one of the speakers at the Japan virtual conference. He is the Senior Strategist and Economist at the Chief Investment Office (CIO) of SMBC Nikko Securities Incorporated in Tokyo.
Mr. Ando recounted that, back in the 1990s, after the Japanese bubble economy burst, a deflationary situation followed. He said that interest rates for deposits and bonds have been low and sluggish in the past 30 years.
The CIO executive said people could not expect high returns by putting money in bank accounts and even bonds back then. As there was no expectation for the returns, there was no urgency to make any investment or asset formation among consumers.
Additionally, Mr. Ando remarked that stock prices were not going up. As risk assets, stocks were not sources of sufficient yields for retail investors. Asset management companies could not produce returns.
After briefing the audience about Japan’s asset management history, Mr. Ando described the Chief Investment Office’s important objective. His bureau assists retail customers in formulating investment strategies for long-term asset formation.
Wealth management involves managing the assets of individual customers. Today’s trend is more on turning to investments from savings. Mr. Ando described the West’s wealth management scene as quite advanced and he remarked that Japan is expected to follow suit.
He pointed out that the CIO’s responsibility is giving neutral and reliable investment advice to consumers and assisting them in long-term asset formulation. The CIO also enhances financial and economic education and emphasizes the significance of long-term investment. It provides a more secure investment environment.
Mr. Ando relayed that investments are not only for rich people and those who want to invest. Forming assets and investments are necessary for retirement.
The investment management executive advised the Japanese consumers to invest, open securities accounts, and get advice from professionals.
He remarked that with a long-term type of investment, an investor has to have a goal and select the best possible pathway. Mr. Ando said that an investor needs to seek professional assistance because doing these activities on one’s own is not easy.
He also explained that risk appetite is different from customer to customer. If the client’s risk appetite is higher, he can expect higher returns.
Mr. Ando cited that they are promoting long-term, accumulative investments. The investment professional said that within the CIO, they are trying to develop a long-term portfolio for investment management.
He affirmed that long-term asset management or investment is worthy as investments grow along with the country’s gross domestic product (GDP) growth. If the GDP grows, share prices will grow as well. The short-term changes will be leveled.
Mr. Ando recommended investing for 10 years for which investors will receive returns in certain time. He stressed the significance of long-term investments which is reaping the gains or fruits of investments.
Finally, Mr. Ando emphasized that investing and the importance of long-term investment or asset formation should be discussed at home by families.
3. Japan is promoting financial and economic education.
Enhancing financial and economic education is also another target of Japan to realize itself as an asset management nation. The country will set up asset principles to deliver better results to investors.
According to one of the speakers, they are disseminating easy-to-understand information and journals. Japan is also enhancing the financial and economic education at the workplace, community, and educational facilities. These measures will help develop the consumers’ customs and behaviors to engage in long-term investment.
With the targets of boosting investment and financial literacy among Japanese consumers, the benefits of prosperity and profit are within reach. I certainly learned a great deal from Nikkei Forum’s “Frontiers in International Finance: Japan’s Pathway to Prosperity.” By investing, there is certainly room to grow one’s financial situation and investors have to make an effort for that ideal to materialize.
