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Nomura's Series of Advertisements in the Nihon Keizai Shimbun
Individual Investors' Money to Change Japan's Economic Structure
[ The following article was translated by Nomura ]
| Individual Investors Hold the Key to Japanese Economic Revival |
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Trends in individual investors' money hold the key to Japan realizing the shift to a market-focused system of finance. Ms. Noriko Maki, Announcer for TV Tokyo, asks Takashi Yanagiya, Executive Managing Director, Nomura Securities and Head of Nomura Group's Domestic Retail Division, what the current level of individuals' awareness is regarding investment. |
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Takashi Yanagiya
Director, Nomura Holdings, Inc.
Head of Domestic Retail
Executive Managing Director,
Nomura Securities Co., Ltd. |
Ms. Noriko Maki
TV Tokyo, Announcer |
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Securities Investment is Reaching all Levels of the Community Including the Younger Generations
Deregulation to Lead to New Product Lineups
| Ms. Maki |
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Individual investors' money doesn't seem to have found its way into the markets as anticipated following the removal of unlimited government guarantees on term deposits. |
| Mr. Yanagiya |
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That's what is being said, but it is also true that individuals are steadily participating in the markets. For example, in Nomura's case we have seen a steady increase over the last three years in the number of accounts holding stocks. A broad section of society, including the younger generation, is getting involved in the stock market for a variety of different reasons. Customers tend to purchase stocks in companies they are most familiar with after having first assessed the risks involved. For instance, in the case of women these tend to be department stores, leisure, railway and cosmetic companies. Customers in their twenties and thirties tend to opt for game and amusement industry related companies.
There has also been an increase in the number of customers looking at foreign currency denominated assets interested in diversifying risk from a global perspective. At Nomura we have seen a considerable rise over the last year in the traded volume of products investing in foreign denominated currencies. |
| Ms. Maki |
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I hear the pace of money flowing into the markets is very slow, but the truth is that a new type of investor is appearing on the scene. At the same time, aren't securities companies now allowed to handle a greater number of financial products as a result of deregulation? |
| Mr. Yanagiya |
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Since last year a variety of new products have entered the picture, such as exchange traded funds (ETFs), real estate investment trusts (REITs) and alternative investment trusts. Also, we have received a positive response from investors regarding variable annuity insurance, which we began offering last year.
We intend to continue offering products tailored to meet customers' needs. |
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An Era in Which Individuals Plan Their Own Retirement
This Year Nomura has Organized Lectures at Over 110 Universities
| Ms. Maki |
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In light of a series of financial reforms, individuals' money can no longer afford to remain independent of the markets. For example, the shape of corporate pensions has significantly changed, I believe? |
| Mr. Yanagiya |
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You're right. There has been an increase in the number of companies contemplating the introduction of defined contribution pension plans, partly because pension liabilities have such a large effect on the settlement of their accounts. We are now in an age where employees at these companies and sole business proprietors must decide for themselves how to manage their pensions to plan their retirements. |
| Ms. Maki |
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Based on that, I believe there is a growing need to provide various educational programs to make individuals fully understand their responsibilities as investors and the risks involved. How are you approaching this? |
| Mr. Yanagiya |
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We are continuing with our Basic & Dynamic (B&D) project. These activities are designed to widen the investor base overall by deepening the general level of understanding of securities markets and securities companies. Since last year we have been organizing lectures on the securities market at universities as part of this project. This year we have held lectures at more than 110 universities offering broad opportunities for students to come into contact with the world of securities investment. We would like to continue this approach in the future. |
| Ms. Maki |
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Even so, without a change in the mentality of individual investors Japan will find itself no closer to a market-focused system of finance. I believe Arthur Levitt, former chairman of the Securities and Exchange Commission (SEC), made some valuable comments on this issue. |
| Mr. Yanagiya |
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I think he said something like the training of individual investors is a national strategy. I believe the honing of investment skills by individuals will heighten market efficiency, causing market principles to function so that investments find their way to companies generating greater added value. This in turn will be conducive to revitalizing industry and reviving the economy. Individual investors will develop an increasingly keen eye for evaluating competitive companies. As such, a virtuous circle will be created in which these companies become even more competitive as greater volumes of money flow their way. In that sense, the future development of Japanese individual investors is a particularly important issue; one, which I believe, holds the key to Japan's economic revival. |
| Ms. Maki |
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To achieve that, indirect support in the form of market development and improved rules is still needed, but what do you anticipate? What would you like to see happen? |
| Mr. Yanagiya |
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Reduced tax on investments and deregulation to sharpen companies' competitive edge are desirable. It is also necessary to deliver a message promoting investment to the nation in a straightforward manner. A typical example would be the tax system. |
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Securities Tax Should be Simplified Wherever Possible
There is a Need to Provide Personally Tailored Financial Advice
| Ms. Maki |
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In your mind, what would be the most desirable form securities tax could take? |
| Mr. Yanagiya |
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In principle, a simple dual income tax system that separates financial income represents one ideal form. This system would provide a comprehensive assessment of financial income ranging from stocks to interest received on deposits. I believe that at some future date Japan will enter an age in which individual investors manage their assets assuming personal responsibility in the genuine sense like in the United States by declaring income and deciding themselves which financial products they will use to manage their pensions. Therefore, we must make securities tax more user-friendly where possible. |
| Ms. Maki |
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Securities tax reforms are making progress. However, because the subject is so complicated, in some areas it is unclear whether investors will benefit. |
| Mr. Yanagiya |
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Everyone needs to get to grips with the tax system. For example, from January 1, 2003 the "designated accounts" scheme will be introduced. This system is designed to simplify the process of declaring capital gains on equity transactions. Depending on when stocks are purchased, there are cases when it may be more beneficial not to use the system. As securities professionals we must have a thorough knowledge of securities tax. A structure must be also in place that enables us to offer customers advice tailored to their specific needs. We are fully committed to meeting our customers' expectations. |
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