Fidelity International Retail Investor Survey: High Cash Holdings Among Japanese Investors Suggest Potential Impact on Long-Term Wealth Building

Reasons for cash holdings among Japanese investors: almost half (47%) cite 'funds prepared for emergencies', and 16% cite 'wanting to avoid losses'.

Expected investment returns over the next 5 years average 5.6% annually in Japan, and 8.6% in the Asia-Pacific region.

The main triggers for shifting to investing in Japan are 'improved knowledge of investment targets and methods' (25% each).

Fidelity Investments Japan Limited (President & Representative Director: Colby Penzone; Headquarters: Minato-ku, Tokyo; hereinafter 'Fidelity Investments Japan') has announced the follow-up findings of the 'Be Invested Study (Retail Investor Survey)*' conducted by Fidelity International, surveying 13,000 retail investors in the Asia-Pacific region and Europe (including 1,000 in Japan). Following the previous analysis of investor behavior in a highly volatile market environment, this time the focus is on the reality of cash holdings in investors' asset portfolios and the factors that prompt changes in investment behavior.

In this survey, analysis of retail investors in the Asia-Pacific region and Europe suggested that investors in the Asia-Pacific region tend to have a relatively high cash ratio in their asset portfolios, which may impact long-term investment performance.

Investors in the region currently hold an average of 26% of their asset portfolios in cash, showing an attitude that emphasizes liquidity and short-term peace of mind. This level exceeds the global average of 22% and Europe's 18%, and Japan's high cash ratio stands out particularly at 31%.

Question: Out of your total investment portfolio, what percentage is invested in the following assets? Please answer so that the total equals 100%.

As the main reason for holding cash, nearly half (47%) of Japanese investors cited 'funds prepared for emergencies,' which was the most common response across all surveyed countries and regions. On the other hand, regional differences were seen in the runner-up reasons; while 'waiting for a better investment timing' was frequently cited in Taiwan (28%), Mainland China (23%), and Hong Kong (22%), it was followed by 'wanting to avoid losses' at 16% in Japan.

As such, while a tendency to emphasize loss aversion is seen in Japan, they expect an average annual return of 5.6% over the next 5 years, which significantly exceeds current deposit interest rates. If the cash holding ratio is high, it may affect asset growth and the realization of expected returns.

Furthermore, the expected average annual return for investors across the entire Asia-Pacific region is 8.6%, indicating higher return expectations compared to Japanese investors.

Question: Over the next 5 years, what do you think your annual investment yield will be? (Options: Loss, 1% increments from 0% to 20%, 20% or more)

Factors Prompting Changes in Investment Behavior

The survey also revealed the triggers for investors to move funds from cash to investments. Main factors include the decline in yields of cash products, as well as improved understanding of investment targets and methods, access to professionals, and tax incentives. There are also regional differences in these motivations.

In Japan, 'improved knowledge regarding investment targets' and 'improved knowledge regarding investment methods' were both cited at 25% as the main triggers.

Question: What kind of trigger would make you consider moving cash into investments with higher expected returns? (Select up to two)

Japan Improved knowledge regarding investment targets (25%) Improved knowledge regarding investment methods (25%)

Australia Enhancement of tax incentives (30%)

Taiwan Decline in yields of cash products (27%)

Hong Kong Decline in yields of cash products (37%)

Mainland China Opportunities to consult with professionals such as financial advisors (30%)

Singapore Improved knowledge regarding investment targets (26%)

Furthermore, many investors have shown an intention to review how they utilize their cash. As destinations for reallocation, 52% across the Asia-Pacific region stated they would consider stocks, and 28% would consider bonds and commodities. Stocks were the most frequently cited in all markets, with 48% in Japan also considering stocks as an investment destination.

On the other hand, there is also a tendency to continue emphasizing products with characteristics close to cash, such as fixed deposits. Particularly in Japan, a certain number of investors (16%) answered that they would retain their funds as cash, marking a high level compared to the average across the entire Asia-Pacific region.

Question: If you were to move a portion of your savings to a non-savings asset class, which do you think would be the most likely? (Select up to three)

Atsushi Kuroyanagi, Head of the Wealth Building Research Institute at Fidelity Investments Japan, commented as follows: 'In addition to the current high savings ratio, transferring savings to other asset classes going forward...'