Japanese switch to yen assets

Retail investors in Japan are switching to yen assets amid a prevailing mood of caution that is making it hard for asset managers to tempt them into foreign-focused funds.

More than 60 per cent of respondents to a recent survey reported selling foreign currency-denominated assets in the past year and either putting their money in bank accounts or investing in Japanese equities instead.

Goldman Sachs Asset Management, which conducted the research, found that of the 1,000 investors it questioned, 45 per cent described themselves as “cautious” or “very cautious” towards risk, up 5 percentage points from last year.

Domestic stocks and yen deposits were the most popular investment choices in the 12 months ahead – even though most investors surveyed expected the yen to fall and the Japanese economy to languish over that period.

The survey shows a big change in sentiment from the years preceding the global financial crisis when Japanese households increased their holdings of foreign stocks and bonds.

Bank of Japan data show the share of foreign assets in households’ total financial assets fell to 2.6 per cent (Y40tn, or $502bn) at the end of June, from 2.8 per cent in March. At its pre-financial crisis peak, in December 2007, that share stood at 3.1 per cent.

Asset managers are responding by devising themes that will appeal to the risk-averse mood. A Diam Asset Management fund targets bonds in the relatively resilient, resource-based economies of Australia, Norway, Canada and New Zealand.

Meanwhile, Nikko Asset Management attracted Y51bn ($640m) to a new “Gravity” fund launched in September, sold on the premise of a global shift in economic momentum towards Asia.

The GSAM survey, due to be published on Monday, looked at investors with at least Y30m in financial assets.

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