Japan's Households Shift Massively into Stocks and Funds as BOJ Hikes Rates

Japanese households have been shifting their assets from deposits to stocks and funds at an unprecedented rate. According to recent data, holdings of stocks and investment trusts surpassed insurance and pensions for the first time on record, standing at 590 trillion yen in March, while cash and deposits remained nearly flat at 1,131 trillion yen.

The growth of risk assets is attributed to a combination of factors, including rising share prices, a weaker yen, and the bedding-in of Japan's new tax-free small investment program, NISA. Household holdings of government bonds also reached their highest level in 13 years, at 21.9 trillion yen.

The Bank of Japan raised its policy rate to around 1.25% from 1%, a 25 basis point increase, making it the highest level since 1995. BOJ Governor Kazuo Ueda signaled further increases while cautioning against abrupt tightening.