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An investment strategy that was successful in a deflationary environment has backfired for many Japanese savers after a recent rise in consumer prices.

Inflation shatters Japan's savings myth

Purchasing power of time deposits sinks to 48-year low

HIROKO MATSUMOTO, Nikkei staff writer | Japan

TOKYO -- Inflation is quietly eroding the value of household assets in Japan. In 2022, the purchasing power of time deposits hit their lowest level in 48 years, calling into a question the wisdom of holding cash in bank and postal accounts. Japanese investors will be in for a rude awakening unless they discard the savings myth that worked so well under deflation.

"Many of our retail clients have radically changed their investment stance after feeling the impact of inflation," said Takeshi Fukuda, head of Financial Standard. The Tokyo-based independent financial adviser last month received 30% more inquiries compared with the previous year regarding investment vehicles that can beat inflation. Assuming a 2% inflation rate, the company now recommends global stocks to clients in their 30s to 50s, and bonds and high-dividend stocks to those aged 60 and older, according to Fukuda.

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