Financial services to Japan
(Last updated: 24 Nov 2011)
Trends and opportunities
The market
Financial assets held by Japanese households and pension schemes are worth over A$18.9 trillion.
Japan has over 1.6 million high net-worth individuals (HNWI), defined as those individuals with investable assets of more than A$1 million. They represent US$3.9 trillion and account for a staggering 40.3 per cent of the total HNWI wealth in Asia. This positions Japan as one of the largest wealth management markets in the region.
Approximately 62.7 per cent of household savings are held by people over the age of 60. Most of these assets are invested in cash deposits and other low risk products. The next generation, with an increasing understanding of risk and returns, will begin to take control of these assets and more actively manage their allocation. Even a small percentage shift to higher yielding investments, such as investment trusts, will result in significant increases in assets under management.
Recent investment allocation trends show Japanese households are progressively increasing their exposure to foreign investments – contributing to growth in non-Japanese investments within investment trusts of A$124 billion over the last five years. The trends are similar with institutional investors, who have increased their allocation towards foreign and alternative investments.
Current institutional investor surveys indicate that the trends towards more sophisticated investments will continue. It is likely that more investment management activities will be outsourced to managers with specialised investment capabilities and those who have strong risk management skills and transparency in reporting and disclosures.
There are significant opportunities in the Japanese market and Australian fund managers are well positioned to benefit. Key to success will be not only understanding the market nuances in relation to regulation, taxation and distribution channels but also understanding the Japanese business culture – which is quite unique.
(Source: PwC Report ‘The Australian Fund Manager’s Roadmap to Japan’ July 2011)
The stock market
Japan has the world’s second largest market capitalisation of floating stocks of US$2,835 billion next to USA (US$14,543 billion) as of 31 July 2011.
(Source: Austrade Benchmark Report 2011)
Pension fund
Japan has the world’s second largest pension fund assets of US$3,471 billion at the end of 2010, next to USA (US$15,265 billion).
(Source: Austrade Benchmark Report 2011)
High-Net-Worth Individuals (HNWIs) and plateau of retirement payout projection for baby boomers
Japan has the world’s second largest pool of HNWIs (having investable assets of US$1 million or more) – over 1.7 million people next to USA (3.1 million people) in 2010. (Source: Austrade Data Alert 21 July 2011).
Given the upcoming retirement of the baby boomer generation, Government Pension Investment Fund (GPIF) projects that over the next 10 years the National Pension Fund and Employees’ Pension Fund combined will pay out over A$483 billion a year to Japanese retirees. At the same time, GPIF’s asset levels will be maintained based on inflows from pension contributions for the younger generation. If only one per cent of the above payments to households are invested in investment trusts, there will be a growth in investment trust assets of over A$53 billion by 2020. This, combined with the trend towards more foreign investment, may offer significant opportunities for managers with foreign investment capabilities.
(Source: PwC Report ‘The Australian Fund Manager’s Roadmap to Japan’ July 2011).
Links and industry contacts
Government, business and trade resources for Japan
The Commodity Futures Association of Japan – www.nisshokyo.or.jp/index.html (Japanese only)
The Financial Futures Association of Japan – www.ffaj.or.jp/en/index.html
Foreign Non-Life Insurance Association of Japan – www.fnlia.gr.jp/english/
The General Insurance Association of Japan – www.sonpo.or.jp/en/
International Bankers Association – www.ibajapan.org/
The Investment Trusts Association, Japan – www.toushin.or.jp/english/
Japan CTA Association – www.jade.dti.ne.jp/~jca/eindex.html
Japan Financial Services Association – www.j-fsa.or.jp/index.php (Japanese only)
Japan Securities Dealers Association – www.jsda.or.jp/html/eigo/index.html
Japan Securities Investment Advisers Association – http://jsiaa.mediagalaxy.ne.jp/index_e.html
Japan Venture Capital Association – www.jvca.jp/english/
Japanese Bankers Association – www.zenginkyo.or.jp/en/
The Life Insurance Association of Japan – www.seiho.or.jp/english/index.html
Regional Banks Association of Japan – www.chiginkyo.or.jp/01_gaiyou/index_e.shtml
The Second Association of Regional Banks – www.dainichiginkyo.or.jp/en/index.html
Trust Companies Association of Japan – www.shintaku-kyokai.or.jp/html/trustbanks/e_1.html
Regulators
Bank of Japan – www.boj.or.jp/en/index.htm
Financial Services Agency – www.fsa.go.jp/en/index.html
Securities and Exchange Surveillance Committee – www.fsa.go.jp/sesc/english/index.htm
Stock exchange
Osaka Securities exchange/JASDAQ – www.ose.or.jp/e/
Tokyo Financial Exchange Inc – www.tfx.co.jp/en/index.shtml
Tokyo Stock exchange – www.tse.or.jp/english/index.html
Media
Nikkei – www.nni.nikkei.co.jp/e/fr/freetop.aspx
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.