Archive for the ‘Banking & Investment’ Category

Yearly statistics put recession into slightly better focus

Friday, February 24th, 2012

Here's your money: Bank of Japan

As the fiscal year draws to a close the relevant government ministries and agencies release their statistics for the previous calendar year. This week, the media mostly concentrated on a survey by the Bank of Japan that revealed a steep rise in the percentage of households (two or more people) with absolutely no financial assets, meaning no stocks, bonds, savings or annuities: 28.6 percent, 6.3 points higher than it was in 2010 and the highest it has ever been since 1963, when the BOJ started conducting this particular survey. Among the households that did have financial assets, the average amount per household was ¥11.5 million, or ¥190,000 less than in 2010. The reason cited by the BOJ is a loss of value in securities affected by market performance in response to the March 11 disaster and the European credit crisis. However, one aspect of the survey that tends to get overlooked in most news reports is that 8,000 questionnaires were sent out but only 47.5 percent were returned with responses, which means the number of households represented was less than 4,000.

For a bit more insight into the nation’s economic well-being, there’s the chingin kozo kihon tokei chosa, a survey conducted by the Health, Welfare and Labor Ministry to find out the situation with regards to salaries and wages. According to the results the average monthly pay of a full-time worker in Japan in 2011 was ¥296,800, which was 0.2 percent less than it was in 2010. Yearly salaries have been going down since 2008, when the average was ¥299,980. This amount includes basic wage plus any regular allowances but does not include overtime or bonuses. The ministry received responses from 45,818 firms, each of which has at least ten employees. Broken down a bit further, the average yearly pay for men was ¥328,300 (about the same as it was in 2010) and for women it was ¥231,900. That’s about 70 percent of men’s pay, but ten years ago women’s average pay was 60 percent of men’s.

Continue reading about yearly economic statistics →

Economists think about soaking the rich, a little

Tuesday, February 14th, 2012

One of the most contentious issues to be argued in the next U.S. presidential election is whether or not to tax wealth. President Barack Obama believes the rich aren’t paying their fair share while Republicans are against any increase in taxes (with certain exceptions). Since Japan’s budget deficit is even worse than America’s, levying higher taxes on the rich would seem to be up for discussion here as well, but all we hear about is the consumption tax. Nevertheless, a number of Japanese economists have proposed a fuyuzei, or wealth tax, modeled on a similar idea that’s been used in Europe. The way the tax has been proposed makes its purpose twofold: while it should be able to generate lots of revenue for the government, it may also have the effect of getting dormant savings into circulation, which is just as important as reducing the national debt.

Even Mickey isn't safe

The proposal was recently explained in Tokyo Shimbun by Hiromichi Shirakawa, the chief economist for Credit Suisse. The basic idea is to tax the money in savings accounts and treasury bonds on an annual basis. Based on surveys conducted by the Financial Information Center, the total amount of money in savings accounts and treasury bonds is about ¥854 trillion, so if the wealth tax rate were set at 1 percent, the government could collect ¥8.5 trillion a year. In 2010, the amount of revenue generated by the consumption tax was ¥10.2 trillion.

Other economists have suggested variations on this theme, such as a graduated tax bracket system, meaning the more money you save, the higher the percentage of tax you would pay. Or, in order to really make it a tax on the rich, set a bottom limit for how much money is being saved, so that only people who fall above those lines pay the wealth tax. Of the ¥854 trillion mentioned above, 52 percent is controlled by persons with cash assets of ¥30 million or more.

According to the Bank of Japan, as of December 2011, individual cash assets in Japan amounted to ¥1,471 trillion, at least half of which is money in near zero-interest savings accounts. The wealth tax would not be levied on money invested in securities or insurance. As it stands, the government levies a flat 10 percent tax on capital gains from stocks, while it withholds 20 percent from interest income. Stock profits used to be taxed at 20 percent as well, but the government reduced it to spur investment with the aim of eventually returning it to 20 percent. The increase has been continually postponed, however, presumably because people still aren’t buying enough stock.

Shirakawa has advanced his idea on several TV shows and received numerous complaints from older people, whom the wealth tax would affect more since they have more savings than do younger people. In Tokyo Shimbun he said older people should think of their grandchildren, who will inherit this massive debt. But the main hurdle to introducing such a tax is lack of bureaucratic resources rather than political will. Because so many individuals keep the money in various accounts and/or invest them in various instruments, it is difficult for the Tax Bureau to determine exactly how much each citizen has in terms of assets. In fact, one of the arguments in favor of the controversial taxpayer ID number system currently under discussion is that it would make such calculations much easier, since all accounts and investments would be tied together through a personal ID number. (In fact, the government introduced the same sort of tax in 1950 but cancelled it after three years because it couldn’t get a bead on people’s assets.)

But what about so-called tansu yokin (savings in the wardrobe), meaning cash that is simply stuffed under a mattress or crammed behind the cookie jar, without any record that it even exists? No one has ever estimated how much cash is held secretly in Japan, though every once in a while you get some idea when an old house is torn down and a worker finds a stash of ¥10,000 bills; or an elderly person is swindled over the telephone by someone pretending to be his or her relative needing money right away to solve a problem. Last week, an old woman in Gifu handed over ¥60 million in cash to someone who said he was representing her son. Apparently, she had most if not all of this money on hand.

The rich are getting out while the getting is good

Sunday, October 16th, 2011

Come pick me up

This weekend saw the Occupy Wall Street movement reach Japan, albeit in a more lowkey fashion (for the time being, at least). The income gap is widening in Japan, but because the rich are less prone to showing off their wealth and the media is polite and doesn’t draw attention to them (unless they ask for it), mostly what we know about this gap is at the lower end, with the ranks of the working poor growing by the day.

When it comes to the rich the main difference between Japan and America is that Japan, due to even shakier financial policies and the March 11 disaster, is becoming a riskier place for them to keep their money, and according to the weekly business magazine Diamond an increasing number are taking their assets, as well as themselves, overseas. The number one destination for such high-end economic refugees is Singapore, and not just among the Japanese rich. Chinese millionaires have voted for Singapore with their feet, too, for more obvious reasons. (Sixty percent of Chinese citizens with assets of at least 10 million yuan have applied or plan to apply for exit visas.)

There are three methods for rich people to gain permission to emigrate to Singapore: Be designated as a “retiree” with at least ¥1.2 billion in assets, of which ¥600 million is transferred to a Singapore-based bank account; establish a company in Singapore for ¥7 million and run it for at least 4 years; buy property in Singapore and apply for a resident visa. Some wealthy people may not find any of these methods possible or desirable, and right now Malaysia is moving in on Singapore as the destination of choice, because the conditions for residence are much simpler — and cheaper.

Continue reading about the upper income brackets in Japan →

All in the family: Keeping inheritances is a tricky business

Tuesday, August 23rd, 2011

A recent story reported by all the major media highlights a peculiar aspect of current household economics in Japan. In March, a home in Fukuoka City was broken into and ¥160 million in cash was stolen. One of the people who lived there, a 26-year-old woman, reported the robbery to the police, who have yet to catch the thief.

Wills are almost unheard of in Japan, which may be the problem

During their investigation the police wondered why the woman had such a huge amount of cash in her home. The usual reason is that there is almost no place to park that money these days. With bank interest rates remaining at zero indefinitely, more and more families just sock their money away in the mattress (or, in the Japanese idiom, the wardrobe). Mutual funds and other investment opportunities are available in Japan, but the average Japanese person tends to be averse to anything with risk attached.

In the case of the burgled party, the reasons were a little different. Investigators eventually learned that the ¥160 million was part of a ¥1.45 billion inheritance that the woman and her two older siblings received from their mother, who died in 2008 at the age of 64. The inheritance was made up of both cash and assets, including real estate, and had they properly reported it the three would have been liable for ¥544 million in inheritance taxes. As it stands now they will have to pay more, what with fines and penalties added on. In their case it’s even worse since they may be paying tax on ¥160 million they no longer have.

Continue reading about wills in Japan →

There’s gold in them there wardrobes!

Thursday, August 18th, 2011

If you've got bars of it, you're good as gold, but tooth filings and eyeglass frames will do. (Kyodo photo)

A term that has suddenly come to the fore in recent months is “urban mining,” the idea that there are precious metals in the everyday objects that surround us that can be recycled. The most prominent example is old cell phones, which contain both iridium and gold. There’s not enough in one to make its owner rich, but, for instance, a ton of ore from a gold mine typically gives up only 5 grams of real gold, while a ton of discarded cell phones could represent as much as 150 grams of gold.

Japan is generally acknowledged to have the largest potential urban mine of any country in the world. It is believed the general public possesses 6,800 tons of gold, mostly in the form of jewelry and accessories, but also in ingot and bar forms, not to mention “hidden” gold in electronics devices. (Many Japanese keep their old cell phones because they want to hold onto the data they contain.) That’s the equivalent of 16 percent of what is estimated to be all the “uncovered” gold in the ground worldwide. Silver is even more: 60,000 tons, or 22 percent of the amount still buried.

Continue reading about a new sort of gold rush →

Regional bank tries to make money work for good things

Sunday, June 5th, 2011

Small, regional banks have a tough time trying to get you to switch your business from megabanks, whose main benefit to average consumers is the fact that their branches can be found anywhere in Japan. More locally situated banks tend to grow up around local commercial customers, but they need average borrowers, too. The trick is: How do they make up for the lack of a widespread presence?

Jonan's Shibuya branch

One obvious solution is to offer services and products that other banks don’t, and in that regard Jonan Shinyo Kinko, which is headquartered in Shinagawa, Tokyo, is quite creative. Perhaps their most controversial gimmick is a “lottery savings account,” a deal that was apparently frowned upon by the Finance Ministry but which has been copied by some other small banks. If you keep a certain amount of money in a special savings account, the bank will buy lottery tickets for you, and they guarantee that your odds of winning are greater than if you bought the tickets yourself.

The latest product from Jonan (which means “south of the castle,” thus indicating Shinagawa’s position in relation to Edo Castle) is much more edifying. The bank believes that Japanese society is “not safe” as long as it relies so much on nuclear power for its energy needs, and wants to encourage not only conservation but also the promotion of renewable energy sources. For its own part, Jonan has pledged to reduce its own energy consumption by 30 percent over the next three years by resetting its air conditioners and heaters, applying energy saving fixtures and facilities, installing better insulation and buying into a self-generating power system for its own offices.

Then on April 28, the bank made an announcement that it would go even further. Customers could expect more beneficial interests rates on both savings accounts and loans if they could prove to the bank that they were making a concerted effort to be more energy efficient. For instance, a depositor who could show Jonan that he spent more than ¥100,000 on conservation devices such as solar systems, electrical rechargers, or LED lamps would receive an extra 1 percent in interest on savings accounts of up to ¥1 million. Given that most banks only give about 0.02 percent, it’s a sizable allowance. In addition, if a customer takes out a home improvement loan to boost the energy efficiency of his dwelling for amounts between ¥500,000 and ¥3 million, the loan will be interest free for the first year, and thereafter interest will be fixed at 1 percent for loan periods of 3 to 8 years. Most home improvement loans are around 3.5 percent.

Jonan isn’t the only bank that is trying to make a difference since the March 11 tragedy, though it seems to be the only one that has tied its sense of social responsibility to rewards for customers. Sony Bank currently offers limited time savings accounts with special interest rates, of which Sony will donate 0.01 percent to charity. Basically, it’s no skin off Sony’s nose. Jonan, on the other hand, puts its money where its mouth it.

Yen surge not as strange as it sounds

Tuesday, March 22nd, 2011

Last week, when all those foreigners bolted the country they got a nice little windfall from the ongoing crisis if they traded in all their hard-earned yen for whatever currency they’d need to get by back home. When markets opened after that nerve-wracking weekend the U.S. dollar, for instance, had lost up to ¥5 since the week before, from 82 to 77. A lot of people were dumbfounded, since such a reaction flies in the face of so-called textbook economics. Why would Japan’s currency get stronger as a result of such a disaster? Wouldn’t people be trying to unload their yen?

Whoops!

The easiest explanation for the surge was the idea of “repatriation.” Japanese companies with investments overseas in other currencies quickly exchanged much of their holdings into yen in order to pay for reconstruction or, in the case of insurance companies, to pay benefits to people and businesses with damage policies. However, as most Japanese economists have pointed out since then, that alone wouldn’t have explained such a pronounced increase in such a short time.

According to the Mainichi Shimbun, the Great Hanshin Earthquake of 1995 created a precedent for the yen surge. Three months after that earthquake destroyed much of Kobe, the yen was the highest against the dollar that it had ever been in history up to that point. At the time, Japan’s GDP was still the envy of the world, and investors with extra cash decided to buy yen, believing that it was sounder than a lot of other investments, especially since Kobe would require lots of money to rebuild. They were basically chasing the repatriated yen. As always, Japan’s exporters panicked. The Bank of Japan intervened to bring the yen down, but they were unsuccessful. It wasn’t until the summer, when the United States and Europe joined in the intervention, that the yen started to drop.

Continue reading about the post-quake yen. →

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