The report provides a complete overview of this thriving market, which is again attracting interest from foreign investors and financial institutions, following a 10-year recession. The road to a modern and stable securities market has not been a smooth one, though; it was marked by technical glitches and system failures. Today, increased participation by Japanese retail investors is helping drive the changes, making it a world-class market.
"One of the major changes within the Japanese economy in recent years has been the increased participation in the securities market by retail investors," says Sang Lee, managing partner at Aite Group and co-author of this report. "Driven by the rapid adoption of online trading, Japanese consumers have become an integral part of overall market growth, not only in the equities market, but also in other, more risky asset classes, such as retail FX."
Japan's assets under management, as of year end 2006, were approximately JPY 343 trillion (US$2.9 trillion) and are expected to grow at an annual rate of 28%, reaching JPY 731 trillion (US$5.6 trillion) by 2010. While Japanese investors only have 19% of their wealth in securities, compared to 52% of U.S. investors' wealth, total retail investment assets continue to grow quite rapidly. However, the pension community remains the dominant force in the Japanese asset management industry, with approximately JPY 246 trillion (US$2.3 trillion) in assets.
"Japanese investors of all types are benefiting from an ever-increasing variety of investment products, from target date funds, to environmentally-conscious investments, to infrastructure-related securities and emerging markets," adds Denise Valentine, senior analyst with Aite Group and co-author of this report. "While there is a strong preference for dividend-paying investments and even global government bonds, hedge funds and fund of hedge funds are gaining popularity and growing."