The Japanese have long put up with near-zero interest rates on their personal savings accounts. At the same time, they are worried about a serious shortfall in the national pension program. These problems have pushed retail investors to consider investing in bitcoin.
Low Savings Rates Pushing “Mrs Watanabe” to Bitcoin
Bitcoin is attracting “Mrs Watanabe“, or retail investors who were originally Japanese housewives. Retail interest has jumped, bitcoin exchanges told Reuters on Friday. Investors are “trying to escape rock-bottom savings rates by investing in the cryptocurrency,” the publication wrote.
The world’s third-largest economy has been “under a mounting debt burden that successive governments have failed to address,” the BBC described in May. Japan’s government debts have almost quintupled from 50% of the country’s GDP in 1980 to 239% of GDP today.
Accompanying rising government debts is the falling of the Japanese household savings rate. From its peak of more than 23 percent, it turned negative in 2013.
Today, savings rates at Japanese banks are near zero. One of Japan’s largest banks, Mizuho Bank, offers a 0.001% interest rate on savings accounts. Competing bank MUFG offers the same 0.001% rate whereas Nomura offers 0.02%.
Mutsuko Higo, a 55-year-old social insurance and labor consultant, is among the Japanese retail investors drawn to bitcoin. She bought $1,800 worth of the digital currency to increase her retirement savings in March. “After I first heard about the bitcoin scheme, I was so excited I couldn’t sleep. It’s like buying a dream,” she told Reuters.
Japan’s Pension Problems
About 26 percent of the population is over sixty-five years old in Japan, which is the age they can start receiving pensions. Last month, the World Health Organization (WHO) showed that country’s life expectancy at birth is 83.7 years of age. For more than 20 years, Japan has been ranked number one in this metric.
Meanwhile, the Government Pension Investment Fund (GPIF), which is the world’s largest public pension fund, has been paying out to this growing retiree pool more than it takes in. The fund has also been suffering from poor performance. In 2015, its investment return was -3.81 percent, and in the first quarter of 2016, it suffered a loss of $51.8 billion.
Higo’s personal response to the situation:
Everyone says we can’t rely on Japanese pensions anymore…This worries me, so I started [investing in] bitcoins.
According to Reuters, Japan’s moms and pops are drawn to bitcoin’s gains, now that the digital currency is regulated and readily available to the public. They have been investing in stocks and futures but the broader Asian stock market benchmark has only gained 17 percent year-to-date. Bitcoin, on the other hand, has seen a rise of almost 140 percent against the yen at press time, even with the recent correction. At its peak price, bitcoin gained over 180 percent, according to the country’s largest bitcoin exchange by volume, Bitflyer.
Do you think more Japanese retail investors will turn to bitcoin because of low-interest rates and pension problems? Let us know in the comments section below.