SPECULATORS and much of the investing world have turned optimistic on the yen as Trump’s trade war keeps markets on edge. But there’s one key holdout that isn’t ready for bullishness: Japan’s richest citizens, worried about the economic outlook, according to a global wealth manager.
That’s in part because the country’s most prosperous households, who are sitting on loads of cash in bank accounts losing value by the day due to inflation, are still scarred by the market’s collapse in the early 1990s, according to Daiju Aoki, regional chief investment officer at UBS SuMi Trust Wealth Management Co. in Tokyo.
“Many wealthy clients are very, very concerned about the yen weakening, with 180 or 200 becoming realistic because of the softer economy and lack of investment in industry,” Aoki said in an interview at the firm’s Tokyo office. While Trump’s back-and-forth trade policy remarks muddy the currency’s path in the near-term, those levels may come “within the next economic cycle.”
The currency has weakened in recent weeks, reversing its strengthening trend in the wake of Trump’s inauguration, as global investors game out choppy tariff negotiations and uncertainty over how the president’s policy will reshape global trade. The yen slumped more than 2% on Monday alone, nearing 150, after the US and China temporarily lowered tariffs, triggering a reversal of bearish dollar bets.
A tumble in the yen to 180 per dollar to approach 200 would send it to levels seen in financial history textbooks — the Japanese currency was last at 200 in 1986, a year after the Plaza Accord was signed to weaken the greenback against its major counterparts including the yen. The drag on Japan’s export-reliant economy resulting from the stronger currency prompted stimulus steps that helped fuel a market bubble whose collapse around 1990 set equity investors back decades.
While stock benchmarks are back where they were in the lead-up to the bubble’s burst and the yen has slid to levels seen in that era, changes in Japan’s economy in the decades since the bubble period are part of what spooks the country’s wealthy.
Once considered an economic superpower whose rising exports of electronic goods and cars appeared unstoppable, Japan is faced now with a declining population, and the majority of innovation is happening in places like the US and China. Domestic inflation — which had been low to non-existent for much of the period since the mid-1990’s — is picking up while it’s cooling in the rest of the developed world.
Skeptical Rich
“The wealthy people are really skeptical of the Japanese economy,” Aoki said. Without innovation and population growth, “there’s not enough to support the whole Japanese economy.”
That’s led some clients to gradually increase the proportion of foreign assets they hold, and gold may beckon as a safe haven for others, but “the anxiety of the situation” would likely mean Japanese investors “feel it’s better to hold in cash,” Aoki said.
Rich Japanese households typically hold less financial assets than their counterparts abroad, according to a Nomura Research Institute report. Of high net worth households with at least ¥100 million ($685,000) in assets, about 70% had less than ¥500 million. By contrast, globally 57% of the rich held more than $5 million of financial assets, according to a December 2023 report by NRI’s Koji Noguchi.
The yen would need to slide more than 20% to reach the 180 level that Aoki says his clients are concerned about, from around 146 per dollar this week. Looking back to last summer when the yen stayed weaker than 160 for about two weeks, the slumping currency failed to excite foreign investors and corporations.
“The 160 level wasn’t enough for foreign investors to put money into Japanese markets,” Aoki said. “So the yen could weaken until Japanese companies come back to Japan or foreign companies invest in Japan to help build out the infrastructure.” –BLOOMBERG
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