Sawakami Sees Nikkei at 16,000 Buoyed by U.S.-Sized Savings
February 08, 2012, 10:21 AM ESTBy Masaaki Iwamoto and Satoshi Kawano
(Updates Nikkei 225 in the ninth paragraph.)
Jan. 26 (Bloomberg) -- The Nikkei 225 Stock Average may almost double this year as the Japanese return to equities seeking higher returns on $19 trillion in household savings, according to Atsuto Sawakami, chairman of the country’s largest independent mutual fund.
Japan’s benchmark index may hit 16,000 by year’s end, said Sawakami, whose fund has outperformed the Topix Index in 10 of the past 12 years. Once shares start to rebound, he said, gains will snowball as money pours in from Japan’s households, which have 1.5 quadrillion yen in assets, an amount bigger than the U.S. economy. About 85 percent of that wealth is sleeping in life insurance and savings accounts with interest rates around zero percent, according to the Bank of Japan.
“There’s a lot of energy out there waiting to be released,” the 64-year-old investor said in an interview at the Tokyo headquarters of Sawakami Asset Management Inc. “Once things start to move, you’ll see a lot of money shift into stocks from savings.”
Four recessions and a 77 percent slide in stocks over the past two decades has led Japan’s households to be wary. They keep just 5.6 percent of their wealth in equities, compared with 21 percent in 1989 when the Nikkei peaked at 38,916.
Sawakami predicted a rebound last year only to watch March’s earthquake, tsunami and resulting nuclear meltdowns drive the index down 17 percent. That compares with the 11 percent drop for the Stoxx Europe 600 Index amid the region’s debt crisis.
Pent-Up Demand
Renewed U.S. demand for products such as Toyota Motor Corp.’s Prius hybrid car will trigger a Japanese rally this year, Sawakami said. Consumers in the world’s biggest economy are holding on to their cars and trucks for a record 10.8 years on average as job security and other economic worries keep them from buying big-ticket items, research firm R.L. Polk & Co. said last week.
“That can’t go on forever,” Sawakami said. “You could see an explosion in consumer demand.”
His forecast makes even the most bullish investors look conservative. Some 21 strategists and investors surveyed by Bloomberg News last month estimated the Nikkei will rise 19 percent this year to 10,000.
The benchmark slipped 0.5 percent to 8837.77 as of 12:32 p.m. today in Tokyo. The gauge has risen about 4.6 percent this year, compared with a 5.4 percent advance for the Standard & Poor’s 500 Index and 4.3 percent for the Stoxx 600 in Europe.
Still, Sawakami isn’t the only investor betting that Japanese households may fuel a rebound.
‘Mrs. Homemaker’
“No one, including ‘Mrs. Homemaker,’ has any significant amount of money invested in Japan, and when they start to move, people won’t want to miss it,” David Herro, chief investment officer at Harris Associates LP in Chicago and Morningstar’s international manager of the decade, said last month.
Herro said he started adding “aggressively” to his Japanese holdings last year and a quarter of his $7.8 billion Oakmark International Fund is now invested in the country. “You can hear the stories: ‘Oh, the cheapest developed market in the world. It’s finally hit bottom, time to get in.’”
An investment strategy focused on exporters such as Toyota and tiremaker Bridgestone Corp. has helped Sawakami outperform the Japanese market. His fund has posted a total return of 6.2 percent since it started in August 1999, compared with a 51 percent loss for the Nikkei.
Mutual Fund Maverick
The former head of Pictet & Cie in Japan, Sawakami pioneered selling investments directly to individuals after the country ended a monopoly held by brokerages in 1998. Using lecture tours and more than 20 published books, he built the Sawakami Fund into the country’s biggest commission-free fund with 203 billion yen under management, according to data compiled by Bloomberg.
The fund is second in size to FMR LLC’s Fidelity Japan Growth Fund among actively managed Japanese mutual funds that invest in domestic stocks, the data shows.
“It would take 3,600 years to double your money in a Japanese savings account at 0.02 percent,” Sawakami said, repeating a sales pitch he makes to his audiences of Japanese workers and housewives. “So when the market finally starts to go up, investors are going to respond.”
--Editors: Jason Clenfield, John McCluskey, Jim Powell.
To contact the reporters on this story: Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net
To contact the editors responsible for this story: John McCluskey at j.mccluskey@bloomberg.net; Nick Gentle at ngentle2@bloomberg.net
