Japan Economic Comment: Limited real wage headwinds and wealth effects keep us optimistic on consumption outlook

研报英文原文证据摘录

Japan Economic Comment: Limited real wage headwinds and wealth effects keep us optimistic on consumption outlook

Is the stock market wealth effect beginning to support consumption?

We also highlight the possibility that household wealth effects could become an

increasingly important tailwind for consumption. According to the Flow of Funds,

household assets increased 7.1%y/y (+¥159 trillion) in Q1, one of the strongest gains on

record. Equities and investment trusts rose 28%y/y, accounting for 5.5ppt of total asset

growth. The Nikkei 225 has surged amid the AI-driven equity rally, standing 43% above

its year-earlier level at end-March. By end-June, the increase had widened to 73%, the

largest gain since 1972.

Historically, wealth effects have received less attention in Japan than in the US because

Japanese households allocate a smaller share of their assets to equities and investment

trusts than their US counterparts (57% of total financial assets in the US as of Q1).

Moreover, stock ownership has traditionally been concentrated among older

households, whose propensity to consume out of wealth gains tends to be relatively

low.

However, these dynamics are beginning to change. Supported by the recent equity rally,

the share of equities and investment trusts in total household assets has risen by 8ppt

over the past five years to 24%, approaching the bubble-era peak of 28% recorded in

1991. As a result, the importance of equity-related wealth effects is increasing.

Furthermore, the ongoing investment boom has broadened participation in financial

markets. Working households, particularly younger cohorts, have benefited more than

older households from rising financial asset values (Figure 20). The share of equities and