P&L

Exploding demand for Daiwa’s brokerage services signals that Japanese savers are turning into investors

May 1, 2013
Obsession
abenomics
May 1, 2013

Daiwa-net-income-bn-_chartThe numbers: Awesome. Net income for the three quarters ending in March (Japan’s fiscal Q4) was ¥48.7 billion ($500 million), up from ¥14.0 billion the previous quarter. Net operating revenue jumped to ¥145.8 billion, compared with ¥96.3 billion in the quarter that ended in December 2012.

The takeaway: That crazy growth in net income—it was up nearly 250% on the previous quarter, and nearly 350% on the same quarter last year—comes in large part from stronger demand for equities, the company said (pdf, p.4). Sales of equity products jumped from ¥50.5 billion in the last quarter of December to ¥205.3 billion in the first quarter of 2013.

What’s interesting: Japanese households are starting to invest in equities instead of socking away cash in bonds and low-yield bank accounts. And that’s crucial—for Abenomics to be effective, Japanese savers have to start buying into the stock rally. Though the Nikkei has exploded since November, when Shinzo Abe started looking like a shoe-in for the prime minister spot, that has seemed to have been largely driven by foreign investors. On balance, that’s good because, as portfolio values pick up and Japanese households feel wealthier, they should also feel more inclined to consume—driving price growth. But it could also prove to be a problem since foreign investors are more fickle than the home team crowd. If they start heading for the exit, the market will drop, whipping up a whole new batch of deflationary pressure. The off-the-charts demand for Daiwa’s brokerage services, which are largely domestic, implies that Japanese investors are searching for higher yields than what they can get sitting in safer assets. And they’d do that at least partly because they’re anticipating inflation. As we’ve discussed here a few times before, expectations are the name of the Abenomics game.

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