Hi Maurice, <<stack of cash>> welcome to the club. I wonder perhaps ACF Mike would like to join the cash club? You and I, Maurice, are following the Japan script ...
No URL possible, IHT search engine is down, and I only have this e-mail:
Hi Maurice, <<cash>> Home, safe home: In Japan, cash stash is hottest investment Miki
Tanikawa IHT Saturday, April 13, 2002
Investing in inflation means assuming that the prices of goods and services will rise and adjusting your portfolio accordingly. But what about investing in deflation - which assumes that prices are going to stand still or fall?
Ask the Japanese. A decade of recession, low interest rates, and a moribund stock market have left them painfully short of places to put their yen to work.
Which may explain why the hottest investment vehicle in Japan these days is cash. Japanese savers pulled an equivalent of ¥5.7 trillion ($43.63 billion) from their banks and put it in their home safes between March
and December 2001, according to data released by Bank of Japan. That brings the total balance of household cash holdings to ¥39 trillion - about the amount of investments Japanese make in investment trusts, an equivalent of mutual funds.
One explanation for the trend is the new limit on deposit insurance, which took effect April 1. To help reduce the burden on ailing banks, the government capped the guarantee on interest-bearing fixed-term deposits at ¥10 million.
But "the simplest explanation and probably the best one is deflation," said Jeff Young, chief economist at Nikko Salomon Smith Barney Ltd. in Tokyo. "A generalized expectation that asset prices are going to continue to fall increases the incentive to hold cash."
Consider what happens to a ¥10 million nest egg kept at home versus maintaining it at a bank. At current interest rate of 0.001 percent a year, ¥10 million in a bank will return a depositor just ¥100 a year, minus a tax of ¥20 a year. The depositor is also likely to pay several hundred yen a month in fees for cash withdrawal from ATMs carried out at evening hours and weekends, and a couple of hundred yen per transaction for every bank transfer.
And in an economy where the purchasing power of money is increasing - last year the consumer price index fell 1.2 percent for Tokyo and 0.8 percent for the country overall - cash actually gains in value the longer it is held. A reversal in price trends is not in sight.
Nevertheless, some experts advocate shifting funds into stocks and real estate as a hedge against future inflation, which they think is inevitable. With government debt expected to reach 140 percent of gross domestic product this year, the government may have no choice but to
lead the economy into asset inflation to diminish its liabilities.
"That would be met with much resistance" by the people, said Hiroshi Kato, president of Chiba University of Commerce and a longtime government economic adviser. But with the Bank of Japan resisting buying up assets like real estate and stocks, Kato and others are calling for the government to introduce taxation on cash bills or regional currency with a time-limit for usage. "That's the only reasonable option we have now," he said.
- Miki Tanikawa |
