Japan’s Fear of Risk Is Getting Dangerous – BloombergBusinessweek 12-06-12

Salient to Investors:

Mary Brinton at Harvard said Japan suffers from a play-it-safe mentality which focuses more on potential downsides rather than on opportunities. Brinton and Toshio Yamagishi at Tamagawa University say the breakdown of the lifetime employment system may be the main anxiety that leads people to play it safe – there’s still a prejudice against hiring people mid-career, and second chances are now hard to find, and so if you screw up, it’s over.

Japanese regulators held up vaccines approved decades earlier in other countries. Few Japanese students study abroad. 844 trillion yen sits in cash at home and in savings accounts earning 0.02 percent.

Ken Oikawa at Tokyo Gakugei University said professional baseball teams in Japan bunt twice as often as teams in North America. 

World Values Survey says 73 percent of Japanese describe themselves as risk-averse, while Ghana,Indonesia, and India topped the list who said taking risks is important.

Global Entrepreneurship Monitor said less than 4 percent of working-age Japanese intend to start a business within 3 years, behind only the United Arab Emirates and Russia. The US was 19th of 54 countries surveyed.

With half the population of the US, the Japanese spend nearly as much on life insurance.

Jeff Kingston at Temple University says there’s a hunker-down mentality and a feeling that the LDP guys have been there through thick and thin and have the experience.

Soichiro Monji at Daiwa SB Investments says it was absolutely the right decision to stay away from stocks over the past two decades – the few rallies have proved temporary.

With the Nikkei down 76 percent from its 1989 peak, a generation of Japanese investors has grown up convinced that stocks only go down.

The case for Japanese stocks includes:

  • The lowest taxes on dividends among developed nations and a 10 percent capital-gains tax
  • The Topix Index trades for less than book value
  • The BOJ says only 6 percent of Japan’s household assets are in stocks versus 33 percent in the US and 15 percent in Europe. Overseas investors hold 25 percent of Japanese shares versus 5 percent in 1989.
  • Japanese retirees will live to 84 on average, but households by a person in his 60s have less than half the retirement money they will need. 

Read the full article at http://www.businessweek.com/articles/85578-japans-fear-of-risk-is-getting-dangerous