Japan’s persistent inflation appears to have convinced a growing number of households to reconsider a decades-long tendency to keep the bulk of their assets in cash, central bank data indicate.

The share of stocks and investment trusts in ¥2,199 trillion (US$13.7 trillion or RM64.6 trillion) worth of household assets rose to 19.7% at the end of March, the highest on record, according to Bloomberg calculations based on the Bank of Japan’s quarterly flow of funds data released Thursday. 

While the boost was mainly led by an increase in asset prices, a rise in trading accounted for about a quarter of the 31.5% jump in investment trusts. The assets in stocks and investment trusts both hit a record high totalling ¥432.5 trillion.

Households have coped with a surge in inflation over the past two years, a significant shift after a prolonged period of deflation accompanied by rock bottom interest rates. With the cost of living generally stable or edging lower, individuals tended to keep their financial assets in savings or cash. 

While the ratio of cash and deposits is still a big chunk of total assets, it slipped to 50.9%, the lowest level since December 2007, according to the BOJ data.       

“Japanese people, especially the younger generation, are becoming active in investment due to inflation,” said Junki Iwahashi, a senior economist at Sumitomo Mitsui Trust Bank. “The broadening recognition of inflation is positive news for the BOJ in its efforts to anchor price expectations, but without wage growth catching up, there is a risk consumer spending will stay weak.”

  - Bloomberg