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International Business: Japan
Japan, a Nation of Risk-Takers?
Not yet, but securities firms are targeting Japan's savers
For several weeks in April, Fidelity Investments pitched a tent in front of Tokyo's teeming Shinjuku train station. It showered commuters with 30,000 investing brochures and showed off its Japanese-language WebXpress online trading service. It even bought every bit of ad space on an entire train on the Yamanote commuter line, one of the world's busiest, to flog its mutual funds.
Such in-your-face hucksterism may be out of character for Fidelity. But not considering what's at stake: In the next two years, about $1 trillion worth of savings will be up for grabs. The money has been locked up in 10-year time deposits with Japan's postal system. It will be released over the next 24 months--$105 billion in April alone.BIG PIGGY BANK. Postal time deposits now yield only about 2%, and bank deposit rates are hovering near zero, so investment firms are trying to inveigle Japanese savers into socking away some of the money in equities. As much as $250 billion, or about 6% of Tokyo Stock Exchange's current market capitalization, could move. But "even if a fraction of that [$1 trillion] goes into the market, it would have a meaningful impact," says Bill Wilder, president of Fidelity Investments Japan.
To woo clients, brokers from Fidelity to Goldman Sachs to Merrill Lynch are rushing new products to market, ranging from money market accounts to mutual funds focused on Japanese high-tech stocks and global bonds. In all, Japa-nese have invested about $160 billion in equity-based mutual funds. Fidelity's Wilder believes that amount "could easily double" over the next two years.
The risk is that pushy brokers and booming stock markets could be too successful in luring the cash away. The powerful Finance Ministry treats the $2.5 trillion in the postal system as its own treasure chest. A dramatic exodus could undercut its ability to prop up the bond market--and push up interest rates to punishing levels. That, in turn, could blindside the economy and cut short the Nikkei's rally.
Luckily for the government, postal savers are a very conservative bunch. Seniors own about 70% of Japan's $11 trillion in household financial assets. Only 9% of that is directly invested in stocks and a mere 2% in mutual funds. By contrast, one in two U.S. households owns stock.
So it may take years for a U.S.-style investment culture to develop. "Most of the population doesn't know what a mutual fund is," says Yasuyo Yamazaki, president of Goldman Sachs
Investment Trust Japan, which manages $8 billion. Goldman sponsors a program called Money Angels that revolves around everyday financial issues and is larded with commercials for Goldman's 20 mutual funds. For its part, Charles Schwab Tokio Marine Securities, the joint-venture discount broker that launched on Apr. 21, has turned its Web site into an Investor 101 seminar.EARLY PROMISE. All the same, serious money is on the move. Fidelity, for example, manages $15 billion in Japan and distributes its 21 funds via banks, brokerages, and insurance companies. Its Fidelity Japan Blue Chip Fund, aimed at postal savers, has hauled in a better-than-expected $300 million. It invests exclusively in proven multinationals such as Sony Corp. and Toyota Motor Corp. Wilder hopes Fidelity will triple its assets, to $50 billion, by 2003.
The outlook for Merrill Lynch & Co.'s push into Japanese retail brokering is also improving. In 1998, Merrill absorbed much of busted Yamaichi Securities. It was tough going at first. More Yamaichi clients defected than executives expected. Even so, Merrill has managed to build up 85,000 accounts, $13.4 billion in assets, and 40 mutual funds. Since January, Merrill has been pushing its Year Ahead Japan 2000 fund, which invests in top companies favored by Merrill's researchers. Strauss is confident the brokerage will turn a profit by 2002.
With so much cash--and fees--in play, foreign brokerages will keep courting Japanese savers. And if reluctant investors do jump back in the market in a big way, maybe the Posts & Telecommunications Ministry will have to start a brokerage, too.By Brian Bremner in TokyoReturn to top