Retail investors snub 'Abenomics' savings

The aggressive monetary easing of "Abenomics" may have charmed foreign investors but has so far failed to convince Japanese retail investors to have faith in their home market.

Nippon Individual Savings Accounts, or Nisas, were introduced last year to tempt Japanese households to invest in domestic stocks by waiving taxes - but figures show progress has been underwhelming. The Japanese Securities Dealers Association expects Nisa holders to rise to more than 8m by the end of the year, after 7.3m people had registered accounts by the end of June, with investments totalling Y1.56tn.

But this would still be less than 10 per cent of the country's population of 127m - similar investment schemes in Britain are held by 36 per cent of the population.

Roughly half of the Nisa accounts remain dormant and about 60 per cent of those accounts are held by people aged above 60, meaning the scheme has not lured a new generation of investors in their 20s and 30s.

Japanese individuals have sold more stocks than they have bought for most of the past two decades, with foreign investors accounting for about 60 to 70 per cent of trading in Japan.

Net sales were more than Y3tn this year as retail investors jumped on the opportunity to sell their long-held holdings as the Nikkei 225 Stock Average passed the 18,000 mark earlier this month for the first time since 2007.

Takashi Hibino, chief executive of Daiwa Securities Group, urged Prime Minister Shinzo Abe - empowered by a recent election win - to implement "bold and speedy" steps to strengthen investment incentives and reforms on governance that will help to unlock $14tn of Japan's household assets.

Nisas currently waive taxes on investments of up to Y1m a year for five years. To further galvanise the market, Japanese government officials are considering lifting the Y1m annual limit to Y1.2m, starting in 2016.

They also plan to launch a "junior Nisa" where parents and grandparents can set up an account for children who are 19 or below with an annual limit of Y800,000.

"Of all the measures out there, the junior Nisa will have the biggest impact in terms of scale," said Mr Hibino. "This will allow the Nisa system to become permanent."

Modelled on Britain's Isa accounts, which were introduced in 1999, brokers say the system is unlikely to be more widely embraced unless the investment horizon is extended beyond five years.

Mr Hibino and analysts say Japan's latest push to improve corporate governance including the adoption of a new stewardship code and a renewed focus on better returns on equity will also give more incentives for domestic investors to buy stocks.

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