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Sunday, April 28, 2002


Public rests easy with cash under the futon

As the scandals keep a-comin', the citizens are receiving what many believe is a healthy and long overdue reality check about those whom they've entrusted with their collective well-being. Politicians have always been suspicious types and bureaucrats only slightly less so. But now teachers, policemen and doctors have all become objects of derision rather than respect. And if we now fear them, it isn't so much because of the power they have over our lives but rather for their newly revealed capacity to do harm.

Bankers have long since joined these fallen elites. The Mizuho computer quagmire simply confirmed the public's worst suspicions about the financial sector: that not only do banks not have their customers' interests in mind, but that they can't even function on a day-to-day basis.

The Mizuho mess coincided with the implementation of the dreaded "payoff" system. As is often the case with English words adopted for a specific use in Japanese, "payoff" is inexact, if not downright misleading. Starting April 1, any principal that is kept in a time deposit is guaranteed by the government only up to 10 million yen in the event the bank fails. This policy will be extended to ordinary bank deposits in April 2003.

The feared run on deposits did not materialize, but it's assumed that once many of these accounts mature, depositors with more than 10 million yen will withdraw their money and take it elsewhere. Prior to the Mizuho scandal, banks had become, at best, a necessary nuisance; a place where you simply kept track of your cash, since the interest on deposits is microscopic to begin with. But when computers fail to compute, as they did with Mizuho, even this function ceases to make sense.

The great question, of course, is where this money will go when it leaves the banks. Only about a third of Japan's 1.4 quadrillion yen in household savings is actually in banks in some form. That means most of the remainder is in post office accounts or sitting at home.

The media has had some fun with this idea by reporting on the sudden popularity of gold and home safes. Gold stories are funny because people who buy the metal for the first time usually do not understand that, while gold is "secure" to a certain extent, it is also very heavy. You don't just load it up in your Honda and drive it home. Safes conjure up images of greedy old men laying away neat packets of bills in secret wall compartments.

Reportedly, the government would like to get the middle class more interested in the stock market, which has traditionally been a game played exclusively by corporations and wealthy individuals. The average Japanese person has always favored antei (stability) over higher returns that involve risk, so it will take some "educating" to get them to talk to brokers.

Right now, most of the stock-related information you see on television is aimed at those already in the know, which constitutes a very small demographic. What, exactly, is the real purpose of TV Tokyo's financial wide show, "Opening Bell" (Monday-Friday, 8:55 a.m.)? Considering its hour, the only people who probably watch it are retired folks who've done some research on their own and housewives who need something to talk about with their salarymen husbands.

The show presents economic news and features interspersed with buy-and-sell advice from the Tokyo Stock Exchange, but no effort is made to connect the two in a meaningful or useful way. Since TV Tokyo is affiliated with the Nihon Keizai Shimbun, and therefore can get most of its financial material from them, it's likely that the main reason for the existence of "Opening Bell," as with virtually all TV Tokyo programming, is that it's cheap to produce.

Even more indicative of the gap in understanding about stocks and their function in society are financial services advertisements, which tend to avoid the larger picture of investments, perhaps on purpose. In the West, ads for brokerages or mutual funds focus on long-term security, albeit with a dry, dull seriousness ("We make money the old-fashioned way: We earn it"). Here, financial advertising seems to be aimed at niches.

Last year, one company ran a TV commercial targeting retired men who were told that they could buy stock in the companies they used to work for. It was an odd strategy. You invest not because you want to make money, but because it allows you to retain a connection with the past.

Daiwa Securities' ubiquitous TV commercial goes in the opposite direction. It shows a young salaryman covetously eyeing a huge motorcycle and then, in the next scene, driving it down the highway accompanied by jaunty music. The message is obvious: Make a little extra money right now for yourself, you deserve it. The ad even stresses that Daiwa is open on Saturday. It's the same tack taken by consumer-credit companies, which appeal to young people with the lure of available cash for any immediate need or desire.

In neither of these commercials is stock promoted as a long-term investment strategy, meaning an alternative to more traditional investment schemes like bank deposits, life insurance, or land. The stock market, after all, is essentially gambling dressed up in three-piece suits. Forced to choose between inept money managers and a crapshoot, it's no wonder many Japanese prefer to keep their cash under the futon. At least there they know where it is.

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