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High-Level Global Symposium on Financial Education Seoul, South Korea
February 26, 2014
Development of
Financial Education in Japan
Deputy Director, Policy and Legal Division, Planning and Coordination Bureau, JFSA February 26, 2014
* Any views expressed in this presentation are those of the speaker, and do not
represent the official views of JFSA.
JFSA
Akiyo Mitsumoto
Table of contents 1. Understanding the need for financial
education in Japan from trends of household's asset allocation in Japan
2. Development of financial education in Japan (outline of updated national strategy in Japan and future direction)
3. Outline of “NISA (Nippon Individual Savings Account)” and its implications for financial education of households: NISA will provide opportunities for households to learn about mid- and long term investment.
Development of Financial Education in Japan
2
Cash and Deposits:
567
Insurance and Pension Funds:
1049
Securities: 782
Stocks: 1170
Others: 147 USA
Total: 3715
Cash and Deposits:
792
Insurance and
Pension Funds: 399
Securities: 92
Stocks: 87 Others: 58
Japan
Total: 1428
dash and Deposits:
221 Insurance
and Pension Funds:
189
Securities: 103
Stocks: 44 Others: 5
Germany
Total: 562
* The size of each pie chart shows the total amount of personal-
sector financial assets
Source: Yoshino & Kaji (2013) Hometown Investment Trust Funds, Springer
[2010, Trillion yen]
Households’ Asset Allocation in Japan (1)
“In Japan, cash and deposits are nearly 60% of assets managed.
The amount of marketable securities and shares is extremely small.”
3
Households’ Asset Allocation in Japan (2)
Source: Bank of Japan 4
Around 80% of households financial assets go to safe assets.
Currency and Deposits
Insurance
Pension reservs
4
Households’ Asset Allocation in Japan (3) Development of Financial Education in Japan
Around 50% choose financial institutions for safety, not for high rate of return.
Source: “Public Opinion Survey on Household Financial Assets and Liabilities (2013),” Bank of Japan.
Reasons behind customers’ choice of financial institution
Others
Simple Financial Products
Easy withdrawal and easy to make deposits
Easy to change to cash (Liquidity)
Expected High Rate of Return
High Rate of Return
Principal Guaranteed
Reliability and Safety of Financial Institution
5
Source: Yoshino & Kaji (2013) Hometown
Investment Trust Funds, Springer
(Dividends & Interest receipt) / (Income)
Germany
UK
USA France
“Japanese are engaging in
investment, but the fact is that
their earnings as a
percentage of income are the
lowest in the OECD.”
Japan
Households’ Asset Allocation in Japan (4)
Need for a change in the way of thinking (from saving to investment)
For a long time, Japanese were taught to work harder, rather than to think about
investment. There has been education at home, schools and work places that
values hard earned money while easy money was considered unworthy.
6
7 JFSA
Japan’s Aging Population (1) ~Challenges for younger generations in the future~
(Millions)
140
120
100
80
60
40
20
0
Source: Ministry of Internal Affairs and Communications.
Population structure of Japan
7
Japan’s Aging Population (2) ~Challenges for younger generations in the future~
The household savings rate in Japan has been rapidly
and steadily declining. It is a result of three main factors:
(1) population aging;
(2) declining the number of children, and
(3) growing at a low rate of incomes
Households’ saving rate Canada, Germany, Italy, Japan, Korea, Sweden and USA.
Source: OECD Economic Outlook, Volume 2013 Issue 1 - No. 93 -
JAPAN
8
Source: “Family Income and Expenditure Survey (Savings and
Liabilities) (2013),” Ministry of Internal Affairs and Communications.
(Age groups)
February 26, 2014 9
Share of households’ savings
by different age groups
Increasing Importance of Financial Assets Management in Aging Japan
Many senior citizens still lose money
on fraudulent financial transactions Of all the cases that were informed to and
consulted with JFSA regarding such
transactions, 58% were cases that involved
people over 60's.
(Source: The Status Report of consultations with
Financial Services Users from October to
December, 2013,” JFSA)
Over 60s are richest people in Japan
62.4% were over 60's of all shares of
households’ savings.
Financial education focused
on the older generation is needed
9
Development of Financial Education in Japan
Japan’s National Strategies
used to be:
10
(1) Background
The JFSA organized a study
group on financial education in
November 2012
“High-Level Principles on
National Strategies for Financial
Education” endorsed by the G20 leaders at the
Los Cabos Summit in June 2012
(a)“Agenda for Finance and Economics Education”(2005)
(b) “Financial Education Program” (2007)
(a) was updated in April 2013 by
“Report of Study Group on Financial Education”(2013)
Main Objectives of Financial Education in this Report
~Toward Fair and Sustainable Society~
1. As a Life skill,
2. Encouraging the provision of sound, high-quality financial products
3. Encouraging the effective use of household financial assets in Japan 10
(2) Future policy for financial education in Japan
11
~Based on “Report of Study Group on Financial Education”(2013)~
Development of Financial Education in Japan (2)
Financial literacy that should be attained (1) Emphasis on behavioral aspects (2) Common minimum level of
financial literacy to be attained 4 categories with 15 items ← Shared it among related parties and implement educational activities focusing on such minimum requirements (3) Establishment of standards for
systematic educational content Establish more detailed standards, formulated
in a systematic fashion, for the content of educational content by age and category
Recipients of financial education:
Greater focus on working adults and senior citizens as well as students
Approaches in each Category (1) Approaches for All age • Financial education is provided in
accordance with each age group.
(2) Development of human resources for financial Education
• Enhancing schoolteachers’ awareness and skills for financial education
• Encouraging people who have retired from financial institutions to teach students.
(3) Improvements to information provision of financial products
11
(Making a habit of proper income/expenditure
management (eliminating debts and staying in the
black)
Articulating life plans and understanding the need to
secure the funds required for life plans
Making a habit of assuming a fundamentally careful
attitude toward contracts
Making a habit of confirming the reliability of
information sources and contract counterparties
Understanding that Internet transactions are
convenient but require some precautions different
from face-to-face transactions
[Common to all categories of finance]
Understanding key concepts constituting the
foundations of financial education (interest (simple
interest, compound interest), inflation, deflation,
exchange rates, risk-return, etc.), and the
selection/use of financial products suited to financial
and economic circumstances
Understanding the importance of ascertaining the
actual cost (price) of a transaction
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Common Minimum Level of Financial Literacy to be Attained (4 categories)
1. Family budget management
2. Life planning
3. Understanding of financial knowledge and financial/economic circumstances, and selection/use of appropriate financial products
[Knowledge of the basics of financial transactions]
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
Understanding for which contingencies (death, illness,
fire, etc.) one should seek insurance coverage
Understanding the amount of economic security required
should a covered contingency occur
Understanding basic precautions when arranging a home
loan
① Importance of setting a reasonable loan limit and
putting together a repayment plan
② Importance of preparing for the possibility of
circumstances that could make repayment difficult
Making a habit of avoiding thoughtless/reckless use of
credit cards and credit card loans
Understanding that seeking higher returns will entail
assuming higher risks, although risk tolerance varies
from person to person
Understanding the effectiveness of diversification in
wealth building (diversifying investment assets and
investment start times)
Understanding the effectiveness of long-term
investments in building wealth
Understanding the importance of appropriately
employing outside experts when selecting/using financial
products
[Insurance products]
[Loans/credit]
[Wealth-building products]
4. Appropriate use of outside expertise
12
Financial intermediaries • Banks • Broker-dealers • Insurance
companies
• Asset managers • Exchanges
JFSA
Inspection Supervision
Investment
Debt Equity
Financial education
Household
Senior people Working people -junior workers -senior workers University Students Elementary, junior and high school students
SMEs, Large companies
Deposit, etc.
Direct investment
Consumer Affairs Agency
Collaboration Collaboration
① Ensure financial stability ② Protect depositors ③ Facilitate financing
Enterprises
BOJ
CCFCI
Central Council for Financial Services
Information
Associations
Roles Played by the Financial Services Agency (JFSA)
Ministry of Education
Schools
“Committee for the Promotion of Financial Education” 13
(1) A forum (“Committee for the Promotion of Financial Education”)
was organized to address the following issues ・ Define what to be learned at what age group ・ Promote the mutual linkage of websites of relevant organizations (2) Regular measurements of
effectiveness Utilize the CCFSI’s “Financial Literacy
Survey” to measure progress in making financial education available.
Measures for promoting financial education
Development of Financial Education in Japan (2)
14
JFSA’s website
Promoting the Central Council’s website (“Shiruporuto”) as the first line access point.
“Shiruporuto”
Way forward… A survey targeted at 7,000 people in 2013 (conducted by Japan Securities Dealers
Association) shows that 46.8% answered that they did not feel that they need to learn
about securities investment in their life.
Item Outline
Timing of the
Introduction January 1,2014
Investment
period 10 years(2014~2023)
Scope
Dividends and capital gains derived from
listed shares and publicly-offered stock
investment funds in NISA account
Annual
investment
limit JPY 1 million
Tax-exempt
period 5 years
Eligible
persons
Residents of Japan
(20 years old and above)
Withdrawing Free(Reinvestment is not allowed)
Profit/loss
offset
Tax losses generated in NISA accounts
are not available
Number of
accounts Only 1 account per person
NISA gives individual investors a tax exemption on
dividends and capital gains derived from listed shares
and investment trusts up to 1 million yen annually.
15
NISA (Nippon Individual Savings Account) started
~ From Saving to Investment ~
* Income/capital gain from NISA is exempted from taxation for a
maximum of 5 years.
* After the 5-year exemption period, investors can:
> continue tax exemption through newly available investment limit; or
> transfer securities into an ordinary account.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ・・・
2023 JPY1M
2022 JPY1M
2021 JPY1M
2020 JPY1M
2019 JPY1M
2018 JPY1M
2017 JPY1M
2016 JPY1M
2015 JPY1M
2014 JPY1M
Investment Period:
10 years from 2014
Tax-exempt period : 5 years
15
NISA is an appropriate arrangement for reduction of risks associated with investment through diversification and medium to long-term holding
2014 2015 2016 2017 2018 2019 2020 2021 …
…
1 mill. JPY
1 mill. JPY
1 mil. JPY
(1) Investment of 1 million JPY every year (diversification in investment period)
sale of assets
(2) Dividends and capital gains are tax free for five years, but if assets are sold before that period ends, the tax free benefit cannot be reused again for this 5-year facility (appropriate for medium to long-term asset holding)
2014
2015
2016
…
Enhancement of Financial Literacy: better understanding and use of financial products
NISA (Nippon Individual Savings Account) started
16
February 26, 2014 JFSA
Thank you! 17
Learning “Contract” in class • A photo from February 23, 2014 at
the Megurita Primary School in Tokyo. The fifth grade students were attending the financial education class. Today’s topic is “what is contract ?”
• The Megurita Primary School has been making advanced efforts in financial education and introduce different programs to all grades in accordance with each grades.
• It is necessary that each age group will develop
financial literacy step by step as the education
proceeds.