The Japanese have grown considerably since the end of World War II. The country now boasts the world’s 3rd largest economy bringing in $4.2 trillion. Having one of the largest manufacturing industries and defense industries, the Japanese Prime Minister Fumio Kishida is seeking to reshape his economy. His first hand is to restructure the asset management business.
With over $5.2 trillion dollars in assets by firms within the country, there is a lot of money to go around. Most of these firms are sitting on high cash reserves. In fact, according to the Prime Minister’s advisors, over 50% of the firm’s holdings are in cash. Right now, one U.S. dollar is equivalent to 147 yen (fluctuates daily), which in terms of foreign exchange markets, is not a good time to invest in the Japanese currency. The prime minister is looking to get rid of cash and turn it into investments.
Three of the largest banks in Japan along with brokerage houses stand on most of the household savings cash. Turning the cash into investments will grow the Japanese economy and strengthen the Japanese yen. The prime minister is asking Japanese households to use their cash to invest in the Japanese stock market and foreign stock markets. Securities and stocks will provide the Japanese people with higher retirement savings, leaving families richer. He also asked companies that sit on large amounts of cash should also look to invest in securities and stocks. Even the federal government is going to invest its cash to improve the yen and strengthen the Japanese economy. Kishida did not specify exactly how much the government would spend.
Japan is struggling to get a grip on inflation. With an aging population, the government needs secure investments to keep Japan from inflation getting to levels that people cannot handle. Japan approved a defense budget for the fiscal year of 2023 at $56 billion, turning it into the 7th largest defense spending nation. Inflation is only going to increase, and the cash that much of the Japanese people and companies sit on will be worth next to nothing if not invested.
Author: Joshua Cheatham
