Japan Post plans to deliver trust sales boost

Japan Post, the world’s biggest financial institution and the traditional safe haven for the country’s millions of highly conservative savers, has outlined ambitious plans to double sales of higher-risk investment trusts.
The company’s announcement highlights the key role it plays in changing households from savers – who put their money in conventional bank or post office accounts, where it earns a tiny rate of interest – to fully fledged investors, who put money into securities to win a higher return.
As Japan Post customers shift more of their money from post office accounts and into investment trusts, they are also likely to contribute to the continuing large flow of money out of the yen and into other currencies.
This is because many investment trusts put money into foreign as well as Japanese assets. This large outflow has been a big driver in pushing down the yen in recent years, enabling the carry trade to prosper.
The Expansion of Japan Post’s investment trust business ties in with the reformist political legacy of Junichiro Koizumi, Japanese prime minister until last year.
Mr Koizumi was determined to reduce the share of the economy controlled by the public sector.
The launch of the investment trusts has the same purpose as the planned privatisation of Japan Post, which is due in October.
Both will switch assets away from the inefficient public sector to the wealth-generating private sector.
This is because money resting in Japan Post’s conventional savings products is primarily used to buy bonds issued by the Japanese government and its various agencies.
By boosting sales of investment trusts and pocketing the fees from selling them, Japan Post hopes to increase profitability at a time when it wants to establish viable financial independence ahead of privatisation.
The company plans to double its sales target of investment trusts to Y1,100bn (USD9.3bn) in the year to March 2008, after reaching its annual 2006-7 target of Y540bn a month early in February, a spokesman told the Financial Times.
Japan Post will also increase the number of post offices selling investment trusts by about 400 to 1,155, although this is still a fraction of the more than 20,000 branches in its network.
From June, the company will add two more investment trusts to its current line-up of nine, said the spokesman. One will con-centrate on high-dividend shares, and the other will change its asset mix as the investor ages.
Japan Post launched investment trusts in October 2005, with offerings from Nomura, Daiwa and Goldman Sachs that inves-ted in bonds, equities and property.