Development Bank of Japan
Research Report
No. 15

Risk-Averting Portfolio of Japanese Households

March 2001

Economic and Industrial Research Department
Development Bank of Japan

Contents
Summary ............................................................................................................................. iii
Introduction ..........................................................................................................................v
I.

Present Situation of Household Assets.......................................................................... 1
1. Situation of Total Asset and Net Asset Holdings:
Households as the Largest Holder of Assets ........................................................................... 1
2. Trends in Household Assets: Financial Asset Accumulation................................................ 3
3. Situation of Physical Asset Holdings and Rates of Return .................................................... 7

II. Structure of the Financial Sector and Situation of Financial Asset Holdings..............11
1. Household Sector Fund Procurement and Asset Management..........................................11
2. Financial Sector and its Asset Holding Structure: U.S.-Japan Comparison ......................13
3. Trends in Household Financial Asset Holdings by Country...............................................14
4. Financial Asset Holdings by Age and Income Bracket ........................................................16
5. Postal Savings as Safe Assets....................................................................................................18
III. Direction of Securities Investment and Household Asset Management Attitudes .... 19
1. Stock Market Directions ...........................................................................................................19
2. Investment Trust and Foreign Currency Deposit Directions .............................................22
3. Household Attitudes toward Securities Investment Management:
Safety Consciousness Increases................................................................................................23
4. Safety Concern and Fund Supply: Role of Financial Intermediation Institutions............26
Conclusion .......................................................................................................................... 27
References........................................................................................................................... 29

Development Bank of Japan Research Report/No.15 i

Risk-Averting Portfolio of Japanese Households
Summary
1. The household sector invests giant assets in excess of five times GDP. Its investment stanceexerts a huge influence on the capital markets and on the supply of funds to corporations.
Particularly in recent years, its direction has been monitored closely in light of changes in theinvestment environment driven by the so-called financial Big Bang, and of the transfiguration offinancial institutions in conjunction with reform of the financial system. In this report we studychanges in the household asset investment stance, particularly those relating to safety, andexamine their impact on future fund supply.
2. As of the end of 1998, total household assets exceeded ¥2,529 trillion and accounted for
34% of total national assets. Net wealth (after subtraction of liabilities) were ¥2,156 trillion, andaccounted for 67% of national wealth (government net assets, national net assets). Household
assets are the largest single component of total assets and net wealth.
Seventy to eighty percent of the physical assets in household accounts is land. After peaking
in 1990, however, the value of land holdings declined in conjunction with the collapse of the
Bubble, leading to a corresponding decline in the total value of physical assets. In contrast,
household financial assets have increased nearly every year, and on a total assets base have cometo exceed the value of land holdings.
3. Despite this increase in net financial assets, the proportion of physical assets is large. This is
one of the special characteristics of Japanese portfolios. To review its background, we see thatover the period from the 1970s up until recently, the long-term average risk-return relationshipwas characterized by a slightly lower rate of return on physical assets and a considerably lower
volatility risk compared to another risk asset, equities. Although the latter had a higher rate of
return in the 1980s, on into the 1990s both showed negative rates of return, with that of equities
being larger. Further, in comparing income gains (dividends on stocks and rent from physicalassets) and capital gains, the income gain on equities was smaller and its proportion declined year
by year. Physical assets were thus superior for stable asset holdings.
4. When we compare recent U.S. and Japanese balance sheets (the outstanding balance offinancial asset liabilities) by segment as of the end of 1999 in order to educe the respective
portfolio, Japanese household holdings of financial assets amounted to ¥1,377 trillion, the bulkof which coincided with liabilities in the financial sector. For this reason, financial sector assets inloans and equities are exposed to volatility, while those of the household sector are in cash anddeposits, insurance, pensions and other low-risk assets.
The U.S. household sector holds financial assets amounted to $35 trillion as of the end of
1999, exceeding those of Japan on a per capita basis. They were managed mainly in direct
investment to corporations by means of stockholdings, and via such institutional investors as

Development Bank of Japan Research Report/No.15 iii

insurance, pensions and mutual funds. Their asset values are exposed to more risks than that of
the Japanese household sector.
5. Looking at the portfolio held by households in Japan, the U.S. and Germany, we see that inJapan the proportion of safe cash and deposits is higher, and that of such risk assets as equities islower. From the 1980s to the 1990s, moreover, the proportion of safe assets rose.
In the U.S. the proportion of deposits has always been low, but a recently rising stock market
has boosted the weight of equities and pensions. In Germany the proportion of deposits washigh until the 1970s, but that of insurance and pensions rose in the 1980s and that of equities
rose in the 1990s.
6. The stock market, as a typical supplier of risk funds, was bearish in the wake of the Bubble's
collapse, but since 1999 it has been active again. Investment trusts are mainly relatively low risk
public and corporate bond funds and those for equities have a low weight, but their overall
outstanding balance is slowly increasing.
7. Marketable securities holdings increased for all income brackets during the Bubble years, butthereafter they shrank sharply centering on the higher brackets and in the past five years havereturned to pre-Bubble levels. Originally the higher the household income the greater the shareof securities among portfolio, but the differential has been muted in the recent five years. Roughestimation of relative risk aversion show an increase in this tendency up to the second half of the
1990s, suggesting a stronger emphasis on safety. The same tendency is apparent in surveys of
portfolios as well.
8. In the 1990’s, the household sector shifted portfolios to safer assets reflecting the decline of
the return on both physical and risk assets after the burst of the Bubble, and the moreconservative stance. Looking forward, enhanced financial services brought about by the financial
Big Bang would make risk assets more attractive and encourage households to take more risks insearch of returns. The conditions, therefore, are expected to result in households becoming
prime supplies of risk money.

iv Development Bank of Japan Research Report/No.15

Introduction
Amid declining asset values and interest rates in the wake of the Bubble's collapse, households as
the largest holders of assets exert major influence on the capital market and the supply of funds
to corporations. It is feared that if there is no change in the household economy's stress on safety,
it will be unable to respond adequately to rising demand for risk money to foster new businesses
and the like.
In this report we examine recent changes in the risk-averting portfolio trends of household
asset management, including physical assets, and consider their future impact on the supply offunds to corporations.
The structure of this report is as follows. In Chapter I, we confirm the scale of household
assets using principally SNA statistics, and analyze the overall direction of their management,
together with the management situation of physical assets. Chapter II considers the current
situation and outlook for the special characteristics of financial asset holdings, as educed frominternational comparisons and observations of the situation by age and income bracket. In
Chapter 3 we turn our attention to asset management, particularly the securities and others into
which household funds are starting to be directed, and review household management attitudes
and the impact on the supply of funds.

Development Bank of Japan Research Report/No.15 v

I. Present Situation of Household Assets
1. Situation of Total Asset and Net Asset Holdings: Households as the Largest Holder
of Assets
As preparation for consideration of household asset management, we will review the asset
situation in Japan and undertake confirmation of the size of the household economy (Figure 1-1).
As of the end of 1998 (the same point in time applies hereinafter), Japan's total national assets
were ¥7,407 trillion, of which financial assets were ¥4,334 trillion and physical assets ¥3,073
trillion. National wealth, defined as net assets (total assets minus liabilities), was ¥3,206 trillion.
National wealth is equivalent to physical assets plus net foreign assets1, but physical assets
exceeded ¥3,073 trillion as against net foreign assets of ¥133 trillion.
Figure 1-1. Situation of Japan's Total Asset and Net Asset Holdings(As of end-1998. Unit: ¥trillion)
Total assets

Household sector
Non-financial
corporations
Financialcorporations
Government
Nonprofit
organizations
Totals for Japan

2,529

Physicalassets
1,336

2,156

820

Physicalassets
1,336

1,786

694

1,092

564

▲ 528

1,092

2,052

1,986

66

46

▲ 20

66

943

417

526

374

▲ 152

526

97

44

53

66

13

53

7,407

4,334

3,073

3,206

133

3,073

Total
assets

Note:
Source:Net assets
Financialassets1,193

Financial assets

National
WealthNet foreign
assetsOwner-operated corporations are included in the household sector.
Cabinet Office, "Annual Report on National Accounts"

This asset stock, impacting substantially as it does on the flow represented by the real
economy, has come to be monitored closely in its configuration as the so-called "stocking"2 ofthe economy. To observe the progress of "stocking," Figure 1-2 compares national wealth and
GDP since the 1970s; in it we see that the stock/flow ratio advanced in the 1980s and went flatin the 1990s. In light of the fact that national wealth is material or physical capital,3 a comparison
with the corresponding flow of material return (GDP minus the income of employed persons) onboth a gross base (including capital consumption in material return) and a net base (subtracting
1

Because aggregated financial assets and liabilities are offset by domestic sectors.
Refer to Japan Development Bank (1994) for the "stocking" concept. (In this report, however, the portions of both that appear
to be expanding are omitted from "stocking" in discussion of net assets.) The increase in the value of stock influences
consumption as the "asset effect," and in the aspects of collateral value and current liquidity influences also corporate fundprocurement.
3
As a contrasting concept, there is human capital. As a recent estimation example, refer to the Japan Economic Research Center,
Financial Research Section (2000). Unlike other assets, human capital does not exist clearly as an asset in market valuations.
Therefore its estimated amount depends strongly on discount ratios and the like, and estimation is difficult. But keying off wage
cuts, growing restructuring and other rising instabilities related to employment, we believe it possible that the value has recently
declined.
2

Development Bank of Japan Research Report/No.15 1

capital consumption from material return) shows that the ratio rose from the 1970s to the 1980s,
and then declined slightly in the 1990s. "Stocking," in the sense of a rising ratio of stock to flow,
declined somewhat in the 1990s. However, we believe that material goods declined while net
financial assets rose, pointing to greater freedom in asset management. This will be confirmed
later in relation to the household sector.

Figure 1-2. Stock (National Wealth) / Flow(%)

25
Vs. gross returnVs. net return
Comparison to GDP

20
15
10
5
0
70
Note:
Source:

72

74

76

78

80

82

84

86

88

90

92

94

96

98

（Year）

Gross return = GDP – income of employed persons
Net return = Gross return – fixed capital consumption
Cabinet Office, "Annual Report on National Accounts"

In regard to the financial liabilities whose situation changed dramatically in the 1990s, a lookat trends in their breakdown (Figure 1-3) shows a slowdown in the growth of liabilities(borrowings and the like, not including equities) that had been so torrid in the 1980s, but withlittle progress in their recovery they continued to expand. The market capitalization of equities
shrank substantially in the decade due to sinking prices. Book values were flat in the 1990s,
indicating a contraction in corporate fund procurement from stocks.
The principal assets of non-financial corporations are ¥1,092 trillion in physical assets. They
hold ¥694 trillion in gross-base financial assets, for a net negative ¥528 trillion (procurement).
Although net assets exceed ¥564 trillion, funds their basic shape is that they collect funds fromhouseholds and others and carry out production investing in production facilities that arephysical assets.
At ¥2,052 trillion, the financial sectors assets are substantial, but almost all are financial assets.
They have a large presence in the financial markets, though most of the assets consist of cash
deposited by households and others. Net assets are small at ¥46 trillion.

2 Development Bank of Japan Research Report/No.15

(¥ trillion)

Figure 1-3. Trends in Financial Liabilities(¥ trillion)
4500

1800

Liability total

4000

1600

Liabilities ex-equities

3500

1400

Equities (market value, right scale)

3000

1200

Equities (book value, right scale)

2500

1000

2000

800

1500

600

1000

400

500

200

0

0
70

Note:

Source:

72

74

76

78

80

82

84

86

88

90

92

94

96

98 (Yearend)Market value: Market price for households, private sector corporations, private sector financial institutions andoverseas; cost price for others.
Book value: Par value for households and private sector corporations, cost price for others.
Cabinet Office, "Annual Report on National Accounts"

Total assets of the household sector4 exceed ¥2,529 trillion and account for 34% of total
national assets. Further, at ¥2,156 trillion, net assets constitute 67% of national wealth (national
net assets and people’s net assets). Within the national economy, households have the largest
single share of both total and net assets. Of the total for households, financial assets amount to¥1,193 trillion,5 or 47%. Physical assets amount to ¥1,336 trillion, of which ¥1,016 trillion, or76%, is represented by land.
2. Trends in Household Assets: Financial Asset Accumulation
We now examine trends in the household asset breakdown from the 1970s onward (Figure 1-4).
Total household assets peaked in 1990 at ¥2,705 billion, declined to 1992, and since then havetrended flat at slightly over ¥2,500 trillion. Although 70~80% of physical assets is land, the valueof landholdings rose with land prices to a 1990 peak and then declined with the collapse of the
Bubble. This is the reason for the contraction in the total amount of physical assets. In contrast,
household financial assets have increased almost every year and on a total assets base haveexceeded the value of landholdings. Despite the Bubble's collapse, we can say that theaccumulation of financial assets has proceeded steadily. We observe this in more detail below.

45Including owner-operated corporations.
When considering the scale of net assets, it must be borne in mind that some bad debt is effectively uncollectible but in SNA
statistics is not yet included with exactitude. Accounting allowances are being made, but actual disposition remains ahead. In
financial institution balance sheets it has been largely recognized as a liability, but this recognition has been made an expectedburden of the future, with the possibility that it will restrain present consumption.
Development Bank of Japan Research Report/No.15 3

Figure 1-4. Long-term Trends in Household Total and Net Assets(¥ trillion)
3,000

2,705

Total assets
Net assets
Physical assets
Land
Financial assets
Net financial assets

2,500
2,000
1,500

1,193

1,000

820

500
0
70
Note:
Source:

72

74

76

78

80

82

84

86

88

90

92

94

96

98

(Yearend)

Owner-operated corporations are included in the household economy.
Cabinet Office, "Annual Report on National Accounts"

The movement of the net assets that are the real wealth of households broadly parallels thatof total assets. But in examining the real levels of the component physical (land, dwellings,
others) and net financial assets since the 1970s (Figure 1-5), we see that from that decade to the1990s they increase about four- to fivefold at the same pace. In the 1990s, however, there began adivergence wherein net financial assets increased while physical assets declined.

（1970＝100）
600

Figure 1-5. Real Level Comparisons in the Breakdown ofHousehold Net Assets

500

Net assets
Physical assets
Net financial assets

400
300
200
100
0
70

72

Notes:

1.
2.

Source:

74

76

78

80

82

84

86

88

90

92

94

96

Owner-operated corporations are included in the household economy.
Extracted from Ministry of Public Management, Home Affairs, Posts andTelecommunications' Consumer Price Index," indexed to 100 as of end-1970.
Cabinet Office, "Annual Report on National Accounts"

4 Development Bank of Japan Research Report/No.15

98(Yearend)

Increases and decreases in the household sector's net assets (sum of physical and net financial
assets) can be broken down as deriving from savings6 and from capital gains/losses (Figure 1-6-1).
Savings increase almost constantly, a little at a time, and amounted to ¥30 ~ 40 trillion in the
1980s and 90s. Capital gains showed wide variation from minus ¥200 trillion or less to plus ¥300
trillion or more. From the chart we see that the basic source of household asset accumulation issavings, but the capital gain-driven increase in the Bubble period was greater.
Further, classifying net asset increase/decrease by physical and net financial assets (Figures 16-2, 1-6-3), we see that the contribution of savings to physical asset increase/decrease was small;since the bulk of the latter consists of land, which cannot be traded except to other sectors, mostof the increase/decrease derives from capital gains/losses. For this reason, in the overallhousehold sector physical asset acquisition is not large, and the bulk of the savings that constitutethe basic source of asset accumulation go into net financial assets.

6

Here "savings" is a term in economics, meaning the flow of "the portion of income not consumed."
Development Bank of Japan Research Report/No.15 5

Figure 1-6. Household Sector Net Asset Increase/Decrease and Breakdown(¥ trillion)

Figure 1-6-1. Net Asset Increase/Decrease

400
300

Capital gains
Savings

200
100
0
▲ 100
▲ 200
▲ 300

70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 (Year)(¥ trillion)

Figure 1-6-2. Physical Asset Increase/Decrease300
Capital gains

200

Savings

100

0

▲ 100

▲ 200
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 (Year)(¥ trillion)

Figure 1-6-3. Net Financial Asset Increase/Decrease

150

100

Capital gains
Savings

50

0

▲ 50

▲ 100
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 (Year)

Note:
Source:Net assets = physical assets + net financial assets
Cabinet Office, "Annual Report on National Accounts"

6 Development Bank of Japan Research Report/No.15

3.

Situation of Physical Asset Holdings and Rates of Return3.1. Ratio of Physical Asset Holdings
Despite the increase in net financial assets in recent years, in the breakdown of Japanesehousehold asset holdings the high ratio of physical assets is a special feature. Comparing this ratio
to that of the U.S. as of end-1998 (Figure 1-7), we see that in Japan's case it constitutes the bulkof total assets but less than 30% in the U.S. case. Because land prices are high in Japan, asset
values become large and the holding ratio high. Yet we can observe that asset management isbiased toward physical assets.
Figure 1-7. Ratio of Household Financial/Physical Assets (U.S.-Japan Comparison)
U.S. (end-1 9 8 0 )Ja pan (end-1 9 8 0)
Financia lassets35%

Physicalassets40%

Physicalassets65%

Financia lassets60%

Ja pan (end-1 9 9 0)

U.S. (end-1 9 9 0 )Financia lassets35%

Physicalassets38%

Physicalassets65%

Financia lassets62%

Ja pan (end-1 9 9 8)

Financia lassets47%

U.S. (end-1 9 9 9 )Physicalassets29%

Physicalassets53%
Financia lassets71%

Note:
Source:Includes non-profit organizations
Cabinet Office, "Annual Report on National Accounts," Flow of Funds Accounts of the United States

Development Bank of Japan Research Report/No.15 7

Seen in a time series, there were no great changes in either country from the 1980s to the1990s, but in the latter decade both moved forward in financial asset accumulation, sending its
holding ratio up.
3.2.Risk and Return on Physical Assets
To consider the background to the high proportion of physical assets in the breakdown of asset
holdings, we observe long-term trends, spanning about 30 years, in the average risk-return
relation between rates of return on household physical assets and those of equities. Although theequity rate of return was somewhat higher, the variability risk was considerably more so (Figure1-8). The return on equities was higher in the 1980s, but in the 1990s both slipped into negative
territory, with that of equities far lower.
Figure 1-8. Comparison of Rates of Return on Physical Assets and Equities
Risk and return comparisons

Rates of return on household physical assets
and equities（%）(Unit: %)
70-79

80

Equities
Physical assets

60
40

80-89

20
0

90-98

▲ 20
▲ 40

70-98

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98(Year)
Note:
Equities are on a TSE First Section base
Source: Cabinet Office, "Annual Report on National Accounts," Japan
Securities Research Institute, "Equity investment rates of return"（％）

Decomposition of contribution tohousehold physical asset rates of return

Notes:

Equities
18.3(20.6)
23.4(12.7)▲ 5.1(13.7)
12.8(20.2)

Physical assets
18.3(12.0)
13.0
(7.3)
▲ 0.6
(4.5)
10.6
(11.7)

1. Average of each year's average rate of return
2. Parenthesized numbers are standard deviations of each
year's rate of return

Decomposition of contribution toequity rates of return

（％）
80

50
Capital gain
40

Incom e gain

Capital gain

70

Divid end yield

60
50

30

40
20

30
20

10

10
0

0

▲ 10
▲ 10

▲ 20
▲ 30

▲ 20
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98(Calend ar year)
Notes:

Source:1. Income gain is owned housing operating surplus + rental/
lease fees received.
2. The assets that are the denominator are the total of net fixed
assets and land at the beginning of each period
Cabinet Office, "Annual Report on National Accounts"

8 Development Bank of Japan Research Report/No.15

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98(Calend ar year)
Note:
Source:Equities are on a Tokyo Stock Exchange First Section base
Japan Securities Research Institute, "Equity investment rates ofreturn"Comparing income gain (dividends on stocks and physical asset use benefits) and capital gain, we
see that the former was smaller for equities and its proportion declined year by year. If seeking
simply return, the distinction has no great meaning. But the stable, use benefit portion of physicalassets is large, and possesses the aspect of a sense of security for their holders.
As we saw earlier, increases in physical assets are not the result of aggressive savings with
their purchase in mind. The principal portion of the increase derives from capital gains. It was
acceptance of this change that has biased households slightly toward investment in physical assets.
3.3.Deflation and Physical Assets
We believe that deflationary tendencies have exerted influence on the recent advances in thefinancial asset ratio.
It is generally said that assets linked to physical assets possess the merit of avoiding
diminution in inflationary times because they have inflation hedge functions, but in deflationary
times financial assets are superior in that they fix principal nominally. In the case of stable assets
in particular, even when interest rates are close to zero, the more the inflation rate declines thegreater the real rate of return, and they become superior. If the rate of inflation is negative, evencash will have a positive real rate of return, and become a profitable investment measure.
Figure 1-9. Trends in Rates of Commodity Price Increases
（％）
25
20

GDP deflator
Rate of rise in CPI

15
10
5
0
▲5
70
Source:

72

74

76

78

80

82

84

86

88

90

92

94

96

98 (Year)Cabinet Office, "Annual Report on National Accounts," Ministry of Public Management, Home Affairs, Posts
and Telecommunications' "Consumer Price Index"

Development Bank of Japan Research Report/No.15 9

Looking at inflation rate trends, we see in Figure 1-9 that the rate was strikingly low in the
1990s and was recently negative, signaling deflation. We believe that this is one reason for thegrowing proportion within financial assets of low-return stable assets.
Land, homes and other physical assets, as well as assets like stocks whose capital gain
portion is large, can show large negative rates of return depending on the economic situation.
Stable assets like deposits, on the other hand, have the advantage of low risk when nominalinterest rates are at zero. In the next chapter, we will examine in more detail the direction of
stable assets in households' asset management.

10 Development Bank of Japan Research Report/No.15

II. Structure of the Financial Sector and Situation of Financial Asset
Holdings
1. Household Sector Fund Procurement and Asset Management
As we have seen in Chapter I, household savings are channeled through the financial sector into
the physical assets of corporations. This increase in net financial assets is the basic flow of money.
At the same time, however, when we look at the excess or shortfall of the money flow in Figure
2-1, we see that in the 1990s the corporate sector came to have a large cash surplus, and throughthe financial sector the household sector's money flow was redirected into the government sector.
Figure 2-1. Momey Excess/Shortfall by Sector (Comparison to GDP)（％）

15

Corporate sector
Public sector

Household sector
Overseas sector

10

5

0

-5

-10
80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

(Fiscal year)
Note:
Source:The household sector includes owner-operated corporations.
Bank of Japan, "Money Circulation Account"In the Bubble period in the second half of the 1980s there was heavy capital investment bycorporations, leading to money flow shortfalls that were nearly balanced by the boom-driven
increase in government sector tax revenues. This generated a virtuous cycle wherein household
economy money fueled corporate investment activity. After the Bubble's collapse, however,capital investment fell off and the corporate sector became cash-flush, while government sector
cash shortfalls have grown because of successive economic pump-priming measures and in 1993
exceeded the corporate sector's shortfall. The latter went into surplus in FY 1994, and its surplus
in FY 1998 exceeded that of the consistently cash-rich household sector.
Examining the flow of household sector money, we observe that in the 1990s borrowings
were restrained (Figure 2-2) and fund procurement limited largely to savings. In the management
aspect (Figure 2-3) risk assets were reduced, especially in the decade's second half, and cash anddeposits swelled enormously.

Development Bank of Japan Research Report/No.15 11

Figure 2-2. Household Sector Fund Procurement
(%)
120
100
80
60
40
20
0
▲ 20

80

82

84

86
Borrowings

88

90

Savings

92

94

96

94

96

Others98(Fiscal year)

Figure 2-3. Household Sector Asset Management
(%)
160
140
120
100
80
60
40
20
0
▲ 20
▲ 40
▲ 60

80

82

84

86

Cash and deposits

88

90

Insurance

92
TrustsOthers = bonds + equities + investment trusts
Note:
Source:The household sector includes owner-operated corporations.
Bank of Japan, "Money Circulation Account"

12 Development Bank of Japan Research Report/No.15

Others98(Fiscal year)

2. Financial Sector and its Asset Holding Structure: U.S.-Japan Comparison
To examine the special features of financial asset management, we will compare recent U.S. andJapanese balance sheets (outstanding balances of financial assets and liabilities) by sector Figures
204 and 2-5).
Figure 2-4. Outstanding Balances of Japanese Financial Assets and Liabilities
Government
401
226

626
Government bonds, others 457
Borrowings 137

Corporate
1,476

715

Borrowings 572
Equities, others 131 Equities, others 640

National property, others(As of end-1999, unit: ¥ trillion)
Household

Finance

3,087
3,143
Cash and deposits 209 Cash and deposits 1,194
Loans 1,578 Borrowings 586
Insurance, pensions 374
Equities, others 202 Equities, others 95

761

1,377
387
Cash and deposits 752 Borrowings 327
Insurance, pensions 374
Equities, others 122
Bonds, others 83
Others46

990

Gross financial
assetsNet financial
assetsPlants, production facilities, others

Net assets, others, vs. overseas

Private-sector non-profit
organizations vs. households
27
52
25

Overseas
224

309
56

85

Note:
Source:Financial assets for borrowers, financial liabilities for lenders. The areas shadowed are net assets and liabilities. Net
financial liabilities show the names of the corresponding physical assets and others.
Financial asset and liability balances in Bank of Japan's "Money Circulation Account"

Figure 2-5. Outstanding Balances of U.S. Financial Assets and Liabilities
Government
179

637

458

Government bonds, others 493

Corporate
1,476

769

Borrowings, others 192
Corporate bonds, others 407
Equities
1,477

National property, others

Plants, production facilities, others

Finance
3,626(As of end-1999, unit: $10 billion)
Household

3,795

Loans, others 252 Borrowings, others 49
761
Bonds 1,960 Bonds
242
Equities 954 Equities
Insurance, pensions 1,041

3,495
Cash and deposits 350
MMFs
84
Bonds
196
Equities
801
Insurance, pensions 1,113
Mutual funds 310
Trusts112
Others
529

2,177

684

2,811

Overseas
Net assets, others, vs. overseas

630

451

169

Gross financial
assetsNet financial
assets180

Notes:

Source:1.

Financial assets for borrowers, financial liabilities for lenders. The areas shadowed are net assets and liabilities.
Net financial liabilities show the names of the corresponding physical assets and others.
2. Household accounts include non-profit organizations vs. households.
Flow of Funds Accounts of the United States

Development Bank of Japan Research Report/No.15 13

As of end-1999, Japan's household economy held financial assets of ¥1,377 trillion, most ofwhich corresponded to financial sector liabilities. The content was low-risk cash and deposits,
insurance, pensions and the like, with direct holdings of equities and others less that 10% of thetotal. For that reason, the wealth effect on consumption of share price advances was not all thatlarge.7
Financial sector assets of loans, equities and others subject to variability risks are muchlarger, and in actuality sustained a major blow in the form of damage to latent profits when the
Bubble collapsed, whereas the direct effect on household assets was mitigated. When loan
obligations go bad they affect the providers of cash, and depending on how they are handled
there is concern that in the end there can also be an impact on households.
As of end-1999, U.S. households held $35 trillion in financial assets. These were mainly
direct supply of funds to corporations through stock ownership, and investments in insurance,
pensions, mutual funds and so forth through institutional investors. Compared to Japanesehouseholds, this is a structure allowing for greater exposure to asset price variability.8
3.

Trends in Household Financial Asset Holdings by Country

3.1. Trends in Safe Assets and Risk Assets in the U.S. and Japan
Comparing U.S. and Japanese household holdings of financial assets in a time series (Figure 2-6),
it is clear that Japan has always had a high ratio of safe cash and deposits, and a low ratio of
equities and other risk assets. The former ratio rose from the 1980s to the 1990s. Part of the
background to this is believed to be the Bubble and its collapse. It can be said that the investment
sentiment that atrophied in the wake of that collapse has yet to recover its former level.
The cash and deposit ratio has always been low in the U.S. Driven by the recent rise in shareprices, the weighting of equities has been rising. This is why there is such a contrast with theJapanese trends.
3.2.Background to the Advance in Equity Holding Ratio in Germany9
In Germany the ratio of cash and deposits was high up to the 1970s, but in the 1980s there wereadvances in that for insurance and pensions, and in the 1990s for equities (Figure 2-6).
In Germany, banking and securities are a single business handled by the "universal bank"system, whose functions have made it easier to borrow from banks than to issue securities; there
is also the historical situation wherein postwar recovery necessitated securing cash for housing
construction. In the capital markets, then, procuring funds for housing was the main activity,
taking precedence over corporate fund-raising, and initially direct fund procurement from thefinancial markets and through equities was not fully developed. In the second half of the 1980s,
however, there appeared the international competition-driven necessity to raise large amounts ofmoney, a greater willingness by individual investors to move into stocks, and other factors thatencouraged corporations to issue stock in plenty, and the capital markets grew apace.

7

In this regard, refer to Japan Development Bank (1998), Chapter 3, section 3.
In regard to the point that U.S. price variability (capital gain/loss) has a considerable influence on the real economy, see Japan
Development Bank (1998) and Development Bank of Japan (2000).
9Hamori (2000) has details on Germany's financial system and financial liberalization. And Aizawa (2000) discusses German
financial reform with comparisons with Japan in mind.
8

14 Development Bank of Japan Research Report/No.15

Figure 2-6. Household Financial Asset Holdings: Japan, Germany and U.S. Comparisons
Japan
100%

80%

60%

40%

20%

0%
73

75

77

79

81

83

85

87

89

91

93

95

97
(Year)

U.S.

100%

80%

60%

40%

20%

0%
73

75

77

79

81

83

85

87

89

91

93

95

(Year)

Germany

100%
80%
60%
40%
20%
0%
73

75

77

79

81

Cash and liquid deposits

83

200%

0%

73

Equities
Source:

74

75

76

77

78

79

80

81

85

87

Other deposits
82

83

84

85

86

87

88

89

89

90

91

92

93

Life insurance, pensions

91

94

95

93

95

97
(Year)

Bonds

96

97

Others

OECD, "Financial Accounts of OECD Countries"

Development Bank of Japan Research Report/No.15 15Development of the Euromarkets in the 1960s saw liquidity flow into and out of Germany,and from around the end of that decade to the early 1970s interest rate liberalization was quickly
accomplished. Moreover, from the second half of the 1970s, fiscal support of small deposits,
which had been carried out from the social welfare standpoint, were cut back to reduce costs.
These actions pulled money mainly out of savings-type deposits and channeled it into otherassets seen as having greater profitability and marketability. Further, and especially in and after
the second half of the 1980s, supplementary liberalizations measures were undertaken centeringon capital market deregulation. In the background here were innovation in financial technology,
stiffer international competition in the capital markets (touched off by the U.K.'s Big Bang) andother factors that to some extent expanded the markets.
In this way, the policy of encouraging savings-type deposits was basically changed andholding of risk assets promoted, with a push from capital market changes, and the ratio of stock
and investment trust holdings rose. In addition, banks stressed small-lot business for individuals.
The 1997 privatization of Deutsche Telekom and listing of its stock enhanced general interest in
securities investment and accelerated the flow of individuals' money into risk assets. Unlike Japan,
share prices in Germany have been broadly bullish, and individuals' capital gains on stocks are inprinciple tax-free (other than for large transactions and short-term trades within one year); thesefactors, too, operated to stimulate the stock market.
4. Financial Asset Holdings by Age and Income Bracket
Figure 2-7 shows financial asset holdings by age. In it we see that the proportion is 36% for those
60 or older. In holdings by age and income bracket, the proportion rises substantially as bothadvance. And in the higher age ranges there are large differences (Figure 2-8).
Going forward, amid the trends toward fewer young people and aging of society, we believethat the proportion of financial asset holdings among the elderly will rise and that differentials
will widen. For that reason, the impact on the financial markets of higher income bracket elderly
persons will likely become more pronounced.10

10

On the outlook for financial asset holdings, see Maki and Nakamura (1998).

16 Development Bank of Japan Research Report/No.15

Figure 2-7. Financial Asset Holdings by Age and Income Bracket
Less than ¥1mil¥1 mil~lessthan ¥2 mil¥2 mil~lessthan ¥3 mil¥3 mil~lessthan ¥4 mil¥4 mil~lessthan ¥5 mil¥5 mil~lessthan ¥7 mil¥7 mil~lessthan ¥10 mil¥10 mil~lessthan ¥15 mil¥15 mil~lessthan ¥20 mil¥20 mil~lessthan ¥30 mil

Over ¥30 mil

No answer

Overall

20s
30s
40s
50s
60s
70s
TotalsOverall(Unit: %)

2.6
13.1
21.4
26.6
24.0
12.3
100.0

26.8
6.7
3.3
2.7
2.6
3.0
4.0

20.6
9.5
4.7
4.2
3.4
4.3
5.3

16.5
8.9
4.8
5.1
3.7
5.0
5.5

5.2
8.3
6.8
4.0
3.7
5.2
5.3

5.2
9.3
6.3
4.0
3.4
2.6
4.9

8.2
12.1
13.8
10.2
8.5
7.8
10.5

5.2
13.0
13.5
10.9
7.5
8.8
10.5

5.2
8.9
14.5
14.7
13.1
13.1
13.1

0.0
3.2
5.5
9.9
8.5
8.0
7.3

1.0
3.6
6.1
8.8
13.8
8.6
8.5

0.0
1.0
4.7
10.3
17.5
18.3
10.3

6.1
15.5
16.0
15.2
14.3
15.3
14.9

100
100
100
100
100
100
100

(Proportion of households)

Figure 2-8. Cumulative Distribution
100
90
80
70
60
50
40
30
20
10
0
～100

～300

～500

～1000

～2000

Total
number of
respondents

Financial Asset Holdings (less than ¥10,000)
20s

Source:

30s

40s

50s

60s

70s

Savings Public Information Central Committee, "Public opinion survey of savings and consumption (1999)"

Development Bank of Japan Research Report/No.15 17

5. Postal Savings as Safe Assets
Payment of principal and interest on postal savings is publicly guaranteed, and like bank deposits
it is an asset with high safety. Term deposits made during the high interest rate era of the early
1990s are maturing in large volumes after April 2000, and the question of whether or not themoney will go into risk assets is favorable for demand for safe assets.
The bulk of the maturing funds will be redirected into postal savings (Figure 2-9). If weconsider that this number is an outstanding balance amount that includes ten years' worth ofinterest, and that the upper limit permissible for savings is ¥10 million, it is clear that a
considerable amount of principal can be redirected into savings. This is one indication thatbasically households are looking for safety.
Part of the money will go into securities and the like, and it is possible that in future investment
trusts will be the conduit. Last August, the re-savings rate declined slightly. The money that did
not flow out is seen awaiting opportunities until interest rates begin rising, and will be monitored
closely going forward.
Figure 2-9. Redirection of Maturing Postal Savings
Amount redirected
Re-savings rate

(Unit: ¥100 million)
Cumulative redirected amount
Cumulative
proportion

April 2000
May

35,70011,302

53.8%
53.3%

35,70047,002

53.8%
53.7%

June
July

10,518
11,175

51.6%
53.7%

57,52068,695

53.3%
53.3%

7,967

51.0%

76,662

53.1%

AugustSource:Ministry of Posts and Telecommunications

18 Development Bank of Japan Research Report/No.15

III. Direction of Securities Investment and Household Asset Management
Attitudes
1. Stock Market Directions
The stock market, a typical supplier of risk money, was long bearish in the wake of the Bubble's
collapse, but again became active from 1999.
1.1. Share Price Trends
The Nikkei Average closed 1989 at ¥38,916, and then declined substantially into 1992 (Figure 31). In the 1994 ~ 96 period it rallied back close to ¥20,000, then sank as far as ¥13,842 in 1998.
There was a sharp recovery in 1999, to cross over the ¥20,000 mark in March 2000 for the firsttime in about two and a half years. Price-wise, that recovery was led by communications,electricals and other information-related issues (Figure 3-2). Since then, impacted by a volatile
Wall Street and other factors, the index has slipped down below ¥20,000 but the basic tone canbe said to be bullish. Share prices have a tendency to run ahead of business conditions, and are
indicating that we can anticipate their future recovery.
Figure 3-1. Share Prices and Value of Shares Traded(¥ trillion)
400(¥1,000)
40

350

35
Traded value (left scale)

300

30
Nikkei Average (right scale)

250

25

200

20

150

15

100

10

50

5

0

0
86

88

90

92

94

96

98

00

(Year)

Note:
Source:Traded value for 2000 is the first quarter's annual rate. Share price is the first quarter's month-end average value.
"TSE Statistical Monthly." Traded value is on a Tokyo market basis. Share price is the year's close.

Development Bank of Japan Research Report/No.15 19

Figure 3-2. Share Prices by Industry
(Yen)
6,000
Communications
ServiceElectrical machinery
Precision machinery
Others

5,000
4,000
3,000
2,000
1,000
0
1
98
Note:
Source:

5

9

1
99

5

9

1
2000
(Year and month)"Others" is the simple average for industries other than those specified.
Tokyo Stock Exchange, "TSE Statistical Monthly"

1.2. Trends in Value of Shares Traded
The TSE traded value trends shown in Figure 3-1 indicate that after expansion to ¥333.6 trillion
in 1989, there was a dramatic contraction to ¥186.7 trillion in the following year. The figure
remained bearish from 1991 to 1998, barely over ¥110 trillion at most, then in 1999 jumped
sharply to ¥185.5 trillion. On a monthly basis, the November 1999 reading of ¥24.7 trillion was
the highest since December 1989's ¥30.6 trillion in the Bubble period. Figure 3-3's illustration oftrends in TSE First Section traded value (buying + selling) by investor category shows which of
the latter expanded in 1999, and highlights the substantial increases for foreigners and individuals
in particular. Net buyers (buying – selling) in that year were chiefly foreigners, while individuals
and corporations were net sellers (Figure 3-4). It appears that the direction of foreigners was oneof reweighting Japan within their international portfolio strategies. On into 2000, individuals were
net buyers.

20 Development Bank of Japan Research Report/No.15

Figure 3-3. Traded Value of Equities(¥ trillion)
500
450

Foreigners
Individuals
Corporations
Securities firms

400
350
300
250
200
150
100
50
0
86

(¥ trillion)
10

88

90

92

94

96

98

00
(Year)

Figure 3-4. Net Buying and Selling of Equities

5

0

▲5

▲ 10
Securities firms

Corporations

Individuals

Foreigners

▲ 15
86

Note:
Source:

88

90

92

94

96

98

00
（Year)TSE First Section agency (brokerage) trading base.
"TSE Statistical Monthly." The figure for 2000 is an annualization of the first quarter's.

Development Bank of Japan Research Report/No.15 21

2. Investment Trust and Foreign Currency Deposit Directions
Investment trusts mainly comprise public and corporate bond trusts. Those for equities have a
low weighting. The overall outstanding balance of investment trusts is slowly growing (Figure 35), driven largely by gains in bond trusts, with a relatively small contribution from gains in theirequity counterparts. In that sense, it is hard to say that there has been any great change in stresson safety.
In the recent situation of foreign currency deposits (Figure 3-6), there has been ongoing highgrowth relative to other investment measures. First quarter 2000 preliminary data showed a 65%
YoY increase.
Figure 3-5. Trends in the Investment Trust Market(¥ trillion)
70
Public and corporate bonds trusts
Equity trusts
Remaining amount of principal

60
50
40
30
20
10
0
80
Note:
Source:

82

84

86

88

90

92

94

96

98

00.1

3

5 (CY. month)

Balances are as of each yearend. For January ~ June 2000, month-end values.
Bank of Japan, "Financial and Economic Statistics Monthly"

Figure 3-6. Growth in Household Equities, Foreign Currency Deposits, Others

Cash and deposits
Current deposits
Time deposits
Transferable deposits
Foreign currency deposits
Equities, capital funds
Non-equity securities
Insurance, pension reserves
Overseas securities investment
Total balance of financial assets
Note:
Source:

1999

1998
4Q

1Q

2Q

3Q

4.5
5.5
4.0
▲ 19.0
47.2
▲ 7.5
▲ 8.8
4.0
▲ 18.7
2.5

4.2
6.0
3.4
▲ 11.0
45.6
6.3
▲ 6.9
3.9
5.6
3.7

3.6
7.0
2.5
▲ 39.3
44.9
19.9
▲ 5.9
4.1
78.9
6.0

3.7
8.7
2.3
▲ 25.9
67.9
43.8
▲ 8.3
4.1
89.7
7.1

First quarter 2000 data are preliminary.
Bank of Japan, "Money Circulation Table"

22 Development Bank of Japan Research Report/No.15(YoY % change)
2000
4Q
1Q
3.4
3.5
7.9
8.7
1.8
1.5
1.4
76.2
61.3
65.0
56.8
24.7
▲ 3.2
▲ 1.7
3.9
3.3
▲ 14.7▲ 30.48.4
6.7

3. Household Attitudes toward Securities Investment Management: Safety
Consciousness Increases
3.1. Trends in Marketable Securities Holding Ratios
In Figure 3-7, we observe that in the Bubble era the ratios of securities holdings increased for all
income brackets and shrank sharply in its aftermath, centering on the higher income groups, andin the recent five-year period have been below pre-Bubble levels. A sinking economy driving
stock prices down has worsened the investment environment and cooled interest in deploying
funds there. The higher the income the greater the tendency to invest in securities, but recently
the differentials in holding ratios by income have narrowed. It is clear that the high-income
households with the highest Bubble-era ratios have been the worst hurt.
Figure 3-7. Holding Ratios of Securities among Financial Assets
(%)
35
30
25
20
15
10
5
1

2

3

4

5

6

Low-income
1978-86

Note:
Source:1987-91

7

8

9

10

High income
1992-94

1995-99(Income rank)

Holding ratios are averages of each yearend's figure.
Ministry of Public Management, Home Affairs, Posts and Telecommunications, "Survey of Savings
Directions"

3.2.Measuring Relative Risk Aversion11
As shown in the definition formula, relative risk aversion is an indicator of attitudes toward riskthat cannot be understood solely by an increase in holding ratios. For example, if the rate of
return on a risk asset is high its holding ratio will naturally also be high, but this indicator takesthat into account.

11

For other measurement examples, see Economic Planning Agency (1999), and Nakayama and Katagiri (1999). But using thesame methods, both derived different conclusions about the risk attitudes of Japanese and U.S. investors. As the reasons forJapanese household negativity toward risk assets, aside from risk-return considerations, Nakayama and Katagiri (1999) cited thefollowing structural causes for declining preferences for risk assets: (1) Insufficient information necessary for investment, (2)the structure whereby commissions and other costs make small-lot investment unprofitable, and (3) compared to savings andthe like, the tax system and other merits are relatively inferior.
Development Bank of Japan Research Report/No.15 23

Though trial-calculated on fixed assumptions, recent relative risk aversion (Figure 3-8)
showed a tendency to rise in the second half of the 1990s. This can be said to suggest greater
stress on safety.12
Figure 3-8. Relative Risk Aversion
7
6
5
4
3
2
1
85

86

87

88

89

90

91

92

93

94

95

96

97

98

99
(Yearends)

Relative risk aversion=

rate of return on risk assets – rate of return on safe assets
variance of rate of return on risk assets

×1
risk asset holding ratio

Note: Rates of return are estimates.
Source:12

Ministry of Public Management, Home Affairs, Posts and Telecommunications, "Survey of Savings Directions,"
Bank of Japan, "Financial and Economic Statistics Monthly," Nikkei Average, others

The "relative risk aversion" measured is one parameter showing household preferences (see supplementary discussion).
Therefore, it should essentially be more stable. High volatility in values is thought to be the limits of theory and measurement.
As the method for using this technique, it is preferable to observe the broad trend and not detailed year-by-year moves. Within
the context of "asset pricing model verification," academic research is going forward on more minute or subtle measurements
using analytical methods that mitigate the fixations of the function model, but it is not easy to obtain clear conclusions. As a
research example, see the Economic Planning Agency (1997). And for a bibliography of detailed surveys from both thetheoretical and corroborative proof aspects of this point, see Keiichi Hori (1999).

24 Development Bank of Japan Research Report/No.15

3.3.Safety Concerns as Seen in Surveys
In surveys of asset management we have also seen heightened concern with safety (Figure 3-9).
According to the Savings Public Information Central Committee's "Public opinion surveys ofsavings and consumption," the proportion of those who gave "preservation of principal" as theirstandard for financial asset selection was no more than 18.2% in 1991, but had risen to 33.8% by
1999, while those citing "yield" declined substantially to 12.5% by the same year. Further, in the
Ministry of Posts and Telecommunications' "Report on the sixth survey (1997) of savings
behavior and savings consciousness," what was most stressed as a selection standard was"preservation of principal and safety," with 47.9% -- far over "good yield and high profit" with
16.3%. This survey is carried out every four years, and on the three occasions since 1989 thistendency was striking.
Figure 3-9. Financial Asset Selection Standards
(%)
35

30

25

20

15

10

5

0
77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00(Year)
Yield
Price advance expectations
Preservation of principal
Financial institution creditworthiness
Ease of cashing out
Freedom of deposit and withdrawal
Others
Source:Savings Public Information Central Committee, "Public opinion surveys of savings and consumption"

Development Bank of Japan Research Report/No.15 25

4.

Safety Concern and Fund Supply: Role of Financial Intermediation Institutions

4.1. Safety Concern and Risk Money Shortfalls13
The heightening of interest in safety by households, the largest supplier of funds can interferewith the activity of corporations, the ultimate recipients of those funds. To develop new
businesses, it is to some extent necessary to take risks in pursuit of returns, and there areconcerns about insufficient supply of the required risk money. In today's low-growth situation,
lateral support in funding of challenging enterprises has become important, but if the suppliers offunds atrophy, shortfalls of fund will inevitably constitute an economic bottleneck.
Further, heightening safety concern is not only a problem of quantity. It impacts as well on
the cost of funds, and has the effect of restraining investment.14 If money is concentrated only ininvestments on which returns are seen as certain, there arises the problem of loss of dynamic
economic activity.
4.2.Reduction of Risk and Burden by Financial Intermediation Institutions
In the direct financial markets, funds are supplied on the principle of self-responsibility, but risk
can be reduced by diversification. Households can also do the same to some extent throughinvestment trusts. In respect of whether or not a corporation's detailed management situation canbe continuously studied and understood, we believe there are some limitations on direct finance.
To some extent information output in concentrated form is more efficient.
Financial intermediation institutions select from among corporate applicants and investment
projects those that are achievable, and that appear to offer a degree of return and safety; suchinstitutions play the role of reducing deployment risks of the funds supplied. Toward that end, it
is required that they develop their screening capabilities, and have the power to bear as much as
possible the risk of unforeseen bankruptcies that to some extent inevitably arise despite such
screening.

13

Regarding the effect on corporate finances of household emphasis on safety, Niimi (1995) has carried out a detailed analysis up
to the first half of the 1990s. In it he pointed out that the background to safety emphasis includes the burdens of housing loans
and education costs, leaving little room for risk asset investment.
14
Heightened safety concern on the part of fund suppliers raises the profitability rate of investment projects excessively, causes
investment to be cancelled and holds down growth. In this regard, see Ando (2000).
26 Development Bank of Japan Research Report/No.15

Conclusion
Household physical assets have declined in conjunction with the Bubble's collapse, while theirfinancial assets have increased steadily almost every year and on a total assets basis have exceeded
the value of landholdings.
Yet, the special characteristic of Japan's asset management is that the proportion of physicalassets is high. Looking at the long-term average risk and return relationships for physical asset
rates of return and equity rates of return, we see no great gaps. But the variability risk of theformer is small, which we believe is one reason for the preference for physical assets within therisk asset category.
On an international comparison of household financial asset holdings, the ratio of cash anddeposits as safe assets is highest in Japan and the ratio of equities and other risk assets is low.
Because Japanese household investment in physical assets via the financial sector is large, thoseassets are little affected by variability in their value.
In the 1990s overall, household investment attitudes were still cautious. Although the ratio of
marketable securities to financial assets rose, it has in the past five years declined back to preBubble levels Particularly striking is the contraction among high-income households. On the
results of rough estimation of relative risk aversion and surveys, it is clear that the 1990s weremore a decade of rising concern about safety.
The stock market again became active in and after 1999. At present, there can be no
confidence that household cash inflow into it will increase constantly. But recent observation of
direct purchases of equities, and of investment in foreign currency deposits and investment trusts,
suggests the possibility of gradual activation. Though risk-taking/return-seeking investment
behavior is limited, it may yet appear.
What has been made clear in this report as a whole is that present household stress on safety
has deep roots. Although the accumulation of financial assets with a high degree of freedom intheir administration is progressing, deployment in cash, deposits and other safe media is still at
the center. And even as investment in marketable securities and other risk assets increases, therate of gain in slow.
Going forward, the improvement in financial services made possible by the Big Bang has
boosted the attractiveness of risk assets and raised expectations for more diversified deploymentof household assets. Toward that end, it is anticipated that conditions will be prepared whereby
households and others will become providers of risk money.
[Koichi Ando <koando@dbj.go.jp>]

Development Bank of Japan Research Report/No.15 27

References
Aizawa, Koetsu (1999), Search for a Japanese-style financial system, Toyo Keizai Shimposha
Ando, Koichi (2000), "Does 'Stress on earnings' management restrain growth?" Nihon
Hyoronsha, Economic Seminar, June 2000
Economic Planning Agency (1997), Annual Economic Report for FY 1997
Economic Planning Agency (1999), Annual Economic Report for FY 1999
Nakayama, Shinobu and Katagiri, Tomoko (1999), "Financial asset selection behavior of Japanesehouseholds: Why are Japanese households negative toward risk asset investment?" Bank ofJapan, Research Monthly, November 1999
Niimi, Kazumasa (1995), "Changes in household financial asset selection behavior and theireffect on corporate finance: Re-discussed – Are there no risk-taking investors in Japan?"Nihon Sogo Kenkyujo, Japan Research Review, March 1995
Japan Development Bank (1994), "Stocking of Japan's economy and its consequences," Chosa 186
Japan Development Bank (1998), "Impact of Asset Price Fluctuations on Household andCorporate Behavior," JDB Research Report, 89
Japan Economic Research Center, Financial Research Section (2000), "Household financial asset
selection and optimum resource allocation," Japan Economic Research Center, The bad debt
problem and the financial markets, chapter 4
Development Bank of Japan (2000), "U.S. economic expansion and the savings and investment
balance, " Chosa, 8Hamori, Naoko (2000), Germany's financial system and financial policy, Chuo Keizaisha
Hori, Keiichi (1999), "Corroborative research on asset pricing models: Outlook," Modern Finance,
6, September 1999
Maki, Hirohisa and Nakamura, Akihiro (1998), "Future directions for individuals' financial
assets," Postal Research Institute Monthly Report, June 1998
Mitsubishi Sogo Kenkyujo (1999), "Defined contribution pensions and the outlook for Japaneseindividuals' financial assets: Trial calculations for each tax system break"
Muramoto, Tsutomu (1998), Financial asset selection by Japanese: Effects of Bubble Experience and the Big
Bang, Toyo Keizai Shimposha
Yonezawa, Yasuhiro and Maru, Junko (1984), Japan's Stock Market, Toyo Keizai Shimposha

Development Bank of Japan Research Report/No.15 29

List of Back Numbers (Including JDB Research Report)
No.15

Risk-Averting Portfolio Trends of Japanese Households (This Issue)

No.14

Consumption Demand Trends and the Structure of Supply: Focus on Retail Industry Supply Behavior,
March 2001

No.13

Recent Trends in the Japanese Economy: Weakness of Current Economic Recovery and Its Background,
March 2001

No.12

Empirical Reassessment of Japanese Corporate Investment Behavior: Features and Changes since the 1980s,
based on Micro-level Panel Data, March 2001

No.11

Survey on Planned Capital Spending for Fiscal Year 1999, 2000 and 2001, October 2000

No.10

Job Creation and Job Destruction in Japan, 1978-1998: An Empirical Analysis Based on Enterprise Data,
September 2000

No.9

Recent Trends in the Japanese Economy: Information Technology and the Economy, September 2000

No.8

Trend of International Reorganization Affecting the Japanese Automobile and Auto Parts Industries, June
2000

No.7

Survey on Planned Capital Spending for Fiscal Years 1999 and 2000, May 2000

No.6

Current Status and Future Perspective of the Japanese Remediation Industry: Technology and Market for
Underground Remediation, May 2000

No.5

Recent Trends in the Japanese Economy: The 1990s in Retrospect, March 2000

No.4

Destabilized Consumption and the Post-bubble Consumer Environment, February 2000

No.3

The Slump in Plant and Equipment Investment in the 1990s: Focusing on Lowered Expectations, the Debt
Burden and Other Structural Factors, January 2000

No.2

Survey on Planned Capital Spending for Fiscal Years 1998, 1999 and 2000, November 1999

No.1

Corporate Strategies in Japan’s Semiconductor Industry: Implications of Development in Other AsianCountries, November 1999

JDB Research Report
No.96

Recent Trends in the Japanese Economy: Focused on Fixed Investment and Capital Stock, August 1999

No.95

Efforts to Protect the Natural Environment in the United States and Germany: Environmental Mitigation
and Biotope Conservation, July 1999

No.94

Survey on Planned Capital Spending for Fiscal Years 1998 and 1999, June 1999

No.93

Towards the realization of ‘environmental partnership’: A survey of Japan’s environmental NPO sector
through comparison with Germany, June 1999

No.92

The Impact of Demographic Changes on Consumption and Savings, March 1999

No.91

Recent Research and Development Trends in Japanese Enterprises: Technology Fusion, March 1999

No.90

Recent Trends in the Japanese Economy: Prolonged Balance Sheet Adjustment, January 1999

No.89

Impact of Asset Price Fluctuations on Household and Corporate Behavior: A Comparison between Japanand the U.S., December 1998

No.88

Survey on Planned Capital Spending for Fiscal Years 1997, 1998, and 1999, December 1998

No.87

Foreign Exchange Rate Fluctuations and Changes in the Input-Output Structure, November 1998

No.86Structural Changes in Unemployment of Japan: An Approach from Labor Flow, November 1998

No.85

Recent Trends in the Japanese Economy: Characteristics of the Current Recession, August 1998

No.84

R&D Stock and Trade Structure in Japan, August 1998

No.83

Survey on Planned Capital Spending for Fiscal Years 1997 and 1998, August 1998

No.82

The Significance, Potential, and Problems of DNA Analysis Research: Establishing Public Acceptance isEssential, May 1998

No.81

The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996, 1997 and 1998
Conducted in August 1997, March 1998

No.80

Recent Trends in the Japanese Economy: Growth Base of the Japanese Economy, January 1998

No.79

Information Appliances: The Strength of Japanese Companies and Tasks for the Future, January 1998

No.78

Challenges and Outlook for the Japanese Machinery Industries: Impact of ISO14000 Series andEnvironmental Cost, January 1998

No.77

Current Conditions and Issues of Computerization in the Health Care Industry : For the Construction of a
Health Care Information Network, January 1998

No.76

Household Consumption and Saving in Japan, December 1997

No.75

The Direction of Japanese Distribution System Reforms: Strengthening the Infrastructure to Support
Diverse Consumer Choices, November 1997

No.74

Foreign Direct Investments by Japanese Manufacturing Industries and Their Effects on International Trade,
October 1997

No.73

The Impact of the Changing Trade Structure on the Japanese Economy: With Special Focus on the Effects
on Productivity and Employment, October 1997

No.72

An Analysis of Foreign Direct Investment and Foreign Affiliates in Japan, August 1997

No.71

Recent Trends in the Japanese Economy: Stock Replacement and New Demand as Aspects of Economic
Recovery, August 1997

No. 70 Corporate Fundraising : An International Comparison, June 1997
No. 69 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in February 1997, May 1997
No. 68 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in August 1996, August 1997
No. 67 An International Comparison of Corporate Investment Behavior: Empirical Analysis Using Firm Datefrom Japan, France and the US, April 1997
No. 66 Housing in the National Capital: Analysis of the Market for Housing using Micro Data, March 1997
No. 65 The Environment for Locating Business Operations in Major East Asian Cities, January 1997
No. 64 Direction of Reconstruction of Business Strategy in the Chemical Industry, January 1997
No. 63 Reflection on Discussions Concerning Regulation of the Electric Power Industry: Deregulation of theElectric Power Industry in Japan and Implication of Experiences in the United States, December 1996
No. 62 Current Status and Future Perspective of the Japanese Semiconductor Industry, November 1996
No. 61 A Breakthrough for the Japanese Software Industry?: Responsiveness to Users’ Needs is the key, October
1996
No. 60 Recent Trends in the Japanese Economy Focusing on the Characteristics and Sustainability of the Current
Economic Recovery, September 1996

No. 59 Analysis of the Primary Causes and Economic Effects of Information: Related investment in the UnitedStates and Trends in Japan, August 1996
No. 58 Selected Summaries of Research Reports: Published in FY 1995, June 1996
No. 57 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1995 and 1996
Conducted in February 1996, May 1996
No. 56 Recent Trends in the Japanese Economy, May 1996
No. 55 Issues Concerning the Competitiveness of the Japanese Steel Industry, February 1996
No. 54 Changes in the Financial Environment and the Real Economy, January 1996
No. 53 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994, 1995 and 1996
Conducted in August 1995, October 1995
No. 52 Current Economic Trends: Focusing on the Appreciation of the Yen and its Effects, October 1995
No. 51 Problems Concerning the International Competitiveness of the Petrochemical Industry, October 1995
No. 50 An Economic Approach to International Competitiveness, October 1995
No. 49 Selected Summaries of Research Reports Published in FY 1994, July 1995
No. 48 Strategies for Improving the Efficiency of the Japanese Physical Distribution System: Part2, July 1995
No. 47 Issues on International Competitive Strength of the Auto Industry, June 1995
No. 46 Problems Concerning the International Competitiveness of the Electronics and Electric Machinery
Industry, June 1995
No. 45 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994 and 1995
Conducted in March 1995, June 1995
No. 44 Strategies for Improving the Efficiency of the Japanese Physical Distribution System, March 1995
No. 43 Capital Spending Recovery Scenario Cycle and Structure, August 1994
No. 42 Progress of International Joint Development between Industrialized Countries on the Private Level, May
1994
No. 41 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993, 1994 and 1995
Conducted in August 1994 , November 1994
No. 40 Selected Summaries of Research Reports Published in FY 1993, June 1994
No. 39 Recent Trends in Japan’s Foreign Accounts, April 1994
No. 38 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993 and 1994
Conducted in March 1994, April 1994
No. 37 Economic Zones and East Asia Prospect for Economic Activity Oriented Market Integration, December
1993
No. 36 Japanese Corporate Responses to Global Environmental Issues, December 1993
No. 35 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992, 1993 and 1994
Conducted in August 1993, September 1993
No. 34 Structure of Profit to Capital in the Manufacturing Industry, September 1993
No. 33 Comparison of the Japanese and The U.S. Labor Markets, October 1992
No. 32 The Relative Competitiveness of U.S., German, and Japanese Manufacturing, March 1993
No. 31 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992 and 1993
Conducted in March 1993, April 1993

No. 30 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991, 1992 and 1993
Conducted in August 1992, December 1992
No. 29 Flow of Funds in the 80s and Future Corporate Finance in Japan, November 1992
No. 28 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991 and 1992
Conducted in February 1992, April 1992
No. 27 An Analysis of Foreign Direct Investment in Japan, March 1992
No. 26 Projection of Japan's Trade Surplus in 1995: Analysis of Japan's Trade Structure in the 80s, February 1992
No. 25 Intra-Industry Trade and Dynamic Development of The World Economy, November 1991
No. 24 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990, 1991 and 1992
Conducted in August 1991, September 1991
No. 23 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990 and 1991
Conducted in February 1991, March 1991
No. 22 Trends of the Petrochemical Industry and its Marketplace in East Asia, March 1991
No. 21 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989, 1990 and 1991
Conducted in August1990,September 1990
No. 20 Deepening Economic Linkages in The Pacific Basin Region: Trade, Foreign Direct Investment andTechnology, September 1990
No. 19 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989 and 1990
Conducted in February 1990, March 1990
No. 18 Petrochemicals In Japan, The US, and Korea an Assessment of Economic Efficiency, February 1990
No. 17 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1988, 1989 and 1990
Conducted in August 1989, October 1989
No. 16 Impact of the EC Unification on Japan’s Automobile and Electronics Industries, August 1989
No. 15 Industrial and Trade Structures and the International Competitiveness of Asia’s Newly Industrializing
Economies, August 1989
No. 14 The Japan Development Bank Reports on Capital Investment Spending: Survey for Fiscal Years 1988 and1989 Conducted in February 1989, March 1989
No. 13 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1987, 1988 and 1989
Conducted in August 1988, September 1988
No. 12 Growing Foreign Investors’ Activities and the Future of Internationalization, September 1988
No. 11 Futures Tasks and Prospects for the Japanese Machine-Tool Industry, July 1988
No. 10 International Division of Labor in the Machine Industries Among Japan, Asia’s NICs and ASEANCountries, June 1988
No. 9

Trends of the Petrochemical Industry and its Marketplace in East Asia around Japan, May 1988

No. 8

The International Competitiveness of Japan and U.S. in High Technology Industries, April 1988

No. 7

The Japan Development Bank Reports on Private Fixed Investment in Japan, March 1988

No. 6

Economic Projections of the Japan’s Economy to the Year 2000, February 1988

No. 5

The Japan Development Bank Reports on Private Fixed Investment in Japan, September 1987

No. 4

Current Trends in the Japanese Auto Parts Industry in Overseas Production, July 1987

No. 3

Current Moves for Foreign Direct Investment into Japan, May 1987

No. 2

Overseas Direct Investments by Japanese Corporations, May 1987

No. 1

Current U.S. Consumption Trends, May 1987