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Japan stocks gain fans among millennials worried about nest eggs

Small investors increase presence as do mutual funds

Younger people anxious about the state of the pension system has led to a slight uptick in stock ownership by retail investors.

TOKYO --- Younger generations in Japan are starting to invest in domestic stocks, albeit in small amounts, anxious that the country's pension system might not deliver the standard of living they expect by the time they retire.

Retail investors owned 17.2% of Japanese shares on a value basis in fiscal 2018, marking the first increase in three years, data released Wednesday by the Tokyo Stock Exchange and others shows. The ratio stood at a record low of 17% in fiscal 2017.

In terms of volume, the investor category that includes individuals owned upwards of 715 million lots last fiscal year, up nearly 10%. The number of retail investors reached 54.73 million, an increase of 3.43 million on the year. Excluding increases due to IPOs and stock splits, 1.92 million individuals began stock investing or boosted their positions.

The growth suggests that millennials are taking initiatives to build assets, rather than relying on the government pension plan.

A Rakuten Securities webinar on Tuesday fielded many questions about the basics of defined-contribution pension plans. Viewership rose 30% from last year, the online brokerage reported.

"I began investing to build nest eggs for my future," a 27-year-old working at a technology company said. Another participant said he wanted to manage assets for after retirement.

Long-term installment-type investments are on the rise among online investors. Rakuten had close to 1.24 million accounts signed up for an automatic installment investing service as of the end of March, up 64% on the year.

An investment program for individuals dubbed NISA, which offers tax-free investments up to a set amount, is also gaining fans. NISA accounts increased 40% over the four years through 2018 to reach about 11.5 million, according to the Financial Services Agency.

Mutual funds also continued to scoop up Japanese stocks, with their holdings rising 1.2 percentage points to 8.4%, hitting a record for a fourth year. Retail investors tend to flock to index funds, which give broad exposure to the market. The increase is also attributed to the Bank of Japan's massive purchases of exchange-traded funds as part of its monetary easing program.

By contrast, foreign ownership declined to a six-year low of 29.1% in fiscal 2018, falling from more than 30% in fiscal 2014. The decrease may mean more stabilization for the market, given that overseas investors include hedge funds and other short-term investors.

Retail investors in Japan owned about 38% of domestic stocks back in fiscal 1970, but the number declined to around 20% in fiscal 1990 after the real estate and stock bubble burst. "In recent years, the elderly have been unloading their holdings as a measure to deal with inheritance tax," said senior equity market analyst Makoto Sengoku at the Tokai Tokyo Research Institute.

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