The income of Japanese households from lump-sum retirement benefits is likely to decrease now that the Baby Boomer retirement wave has crested.
However, lump-sum retirement benefits will remain an important funding source for investments in financial assets, and most of these retirement benefits will likely flow into investment products.
This is a key finding in a joint report from Cerulli Associates and Nomura Research Institute, Ltd (NRI) entitled Asset Management in Japan 2015: Capturing Rising Foreign Interest.
NRI also estimates that households will disinvest in retail Japanese Government Bonds (JGBs) to the tune of ¥6 trillion (US$48.9 billion) annually over the next five years. This disinvestment rate, however, is prone to vary substantially in response to interest rate movements.
"Including both proceeds from maturing JGBs and lump-sum retirement benefits, households will have up to ¥23 trillion available to annually invest over the next five years," says Sadayuki Horie, Senior Researcher at NRI.
Extrapolating trends dating back several years, NRI estimates that ¥18 trillion will flow into ordinary bank deposits annually. Meanwhile, risk assets' average share of household financial asset inflows over the past five years was 20%-30%, most of which went into equity investment trusts.
"If this share remains unchanged, risk assets will see annual inflows of around ¥5 trillion over the next five years," notes Yoon Ng, Asia Research Head for Cerulli Associates.
Asset Management in Japan 2015: Capturing Rising Foreign Interest is a collaboration between Cerulli Associates, a research firm specializing in global asset management and distribution trends, and NRI, a leading provider of consulting services and system solutions.
