Maturing Of Postal Savings Accounts To Deeply Impact Economy
Monday, March 13, 2000
TOKYO (Nikkei)--A massive amount of money is expected to leave the postal savings system over a two-year period starting April 2, when time deposit accounts made when interest rates were high begin to mature. Where this money ends up is sure to have a large impact on the economy.
An estimated 106 trillion yen worth of postal time deposit products will mature over the two-year period, according to the Ministry of Posts and Telecommunications. After taxation and redeposits into the postal savings system, analysts expect around 49 trillion yen to flow out. A total of 40.5 trillion yen, after taxes, will either be spent on goods and services, or be invested in financial products other than the postal system.
The maturing accounts will have earned an aggregate 18 trillion yen in interest income for holders of instruments maturing in fiscal 2000 and 16 trillion yen for products maturing the next fiscal year. A Nihon Keizai Shimbun Inc. study projects this additional income will boost Japan's gross domestic product by an inflation-adjusted 1.6% next fiscal year and a real 0.9% in fiscal 2001.
A Nikkei survey of Tokyo-area households projects that 3.9% in principal from maturing deposits and 2.2% in interest will be rotated into stock investment trusts, for an estimated total of 3.3 trillion yen over the next two fiscal years.
A recent study by Sanwa Research Institute also forecasts that 2-4 trillion yen will move into stocks in the same period on the basis of trends in household assets.
Private-sector banks are expected to line up a maximum of 13 trillion yen in savings accounts. And another 1-2 trillion yen will likely move into foreign-currency-denominated accounts.
On the downside, bond market participants anticipate that long-term interest rates will rise as the Ministry of Finance's trust fund bureau sells off government bonds to make up for the outflow of funds at its disposal as postal savings mature. Sanwa Research estimates that an annual increase of 10 trillion yen in bonds on the market will drive up long-term rates by 5 basis points.
Rising interest rates will make it harder for companies to raise funds to finance their operations and capital investment. The Bank of Japan has agreed to buy government bonds on fears that a concentrated bond sell-off would push up long-term rates.
Long-term rates are now settled. But Atsushi Mizuno, chief strategist at Deutsche Securities Ltd., Tokyo Branch, says: "Upward pressure on long-term rates is building now, given the planned issuance of long-term zaito bonds from fiscal 2001."
At the same time, an official at the Economic Planning Agency discounts the alarmist scenario. "If depositors act rationally," the upcoming rush of time deposit account maturities "will not likely change the overall consumption picture dramatically," this official says.
(The Nihon Keizai Shimbun Saturday morning edition)
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