Research Briefing | May 20, 2022

For how long will Japan’s households support bonds and the yen?

Japan: For how long will households support bonds and the yen?Households’ financial surpluses sharply increased in 2020 and remained high in 2021 due to the Covid pandemic. Most of the surplus continued to go to cash and deposits, but there was a notable increase in funds going to investment trusts (with a large portion invested in foreign equities) in 2021.

Amid rising international yield differentials and a weakening yen, there is market chatter about whether this is the beginning of a structural shift from households’ risk-averse investment style?

What you will learn:

  • We believe the sharp rise in 2021 was temporary, driven by the strong performance of US equities and the dollar. 
  • But Japan’s households will likely continue to increase their foreign portfolio investment in the long term, albeit at a very gradual pace. 
  • Given the sheer size of household wealth, such a shift will have a profound impact on the yen and the Japanese government bonds (JGBs) market.
Back to Resource Hub

Related posts


Short-term outlook for cities deteriorates

Many cities in the world's advanced economies will enter recession in 2023, with soaring inflation and tightening monetary and fiscal policy driving down demand. In contrast, the majority of cities in emerging economies will still enjoy robust economic growth.

Find Out More


Easing supply hurdles won’t offset falling industrial demand in APAC

We earlier argued that Asia’s manufacturing activity has been impacted more by demand than by supply-side pressures, due to strict Covid-related policies. Supply constraints in Asia have been less acute than in the US and Europe, and we had forecast resilient industrial growth in 2022 and 2023 as regional demand recovers. But the global growth outlook has deteriorated since then. Following our recent downgrade to 2023 GDP growth forecasts for most Asian economies, we now expect weaker industrial growth in Asia. That said, there will be divergences across the region.

Find Out More


Why we forecast Japan’s resilient growth in 2023

We expect the Japanese economy to grow at 0.9% y/y in 2023, after 1.6% growth in 2022. Four reasons why we project the relatively resilient growth compared to other advanced economies: pent-up demand, the key auto industry recovery, supportive policy, and a strong base effect.

Find Out More