Mitsumoto Akiyo - 2014 Symposium on Financial Education in Korea

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


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


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










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.

Mitsumoto Akiyo - 2014 Symposium on Financial Education in Korea

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