Nomura Is Teaching Japan High School Kids How to Invest
(Bloomberg) — In the world’s third-largest economy, public skepticism about financial investments has become so entrenched that investment bank Nomura Holdings Inc. is teaching economics fundamentals in high schools to attract the next generation.
About eight in 10 Japanese have never invested in securities, according to a lobby group of brokers in the country. Securities and investments account for just 16% of the 2 trillion yen of household financial assets, compared to 56% in the US.
An asset price bubble wiped out trillions of dollars in wealth in Japan when it burst in the early 1990s, creating a generation of people who believe stocks will only go down. Instead, most have held most of their wealth in cash for decades. As a result, many missed out on the boom in global equities in the years following the 2008 financial crisis.
Now, a target announced by Prime Minister Fumio Kishida to double the income of Japanese nationals from their wealth should encourage people to reallocate more of their savings to investments. Financial literacy could become a central part of the government’s plan, given the belief that proper knowledge is necessary for good wealth management.
In April this year, Japan made it compulsory for high schools to teach finance subjects – including investing in stocks and bonds – as part of a home economics course.
The financial industry has floated various ideas, with Seiji Nakata, Chief Executive Officer of Daiwa Securities Group Inc., suggesting making finance a part of an entrance exam.
The focus on financial education should also benefit brokers. The younger generations and their offspring are increasingly turning to cheaper online apps for stock trading.
Secondary school
In a class held earlier this summer, taught by Yuki Sato, a Nomura associate, first-grade high school students in the city of Sakai, near Osaka in southern Japan, filled out a worksheet to calculate how much money is needed for planning their school year future.
Sato explained to the 16-year-old the importance of managing income and expenses. Financial preparation for marriage, the birth of a child, education and other potentially costly events in the future were also addressed at the meeting by the representative of the country’s largest brokerage firm.
There are indications that the younger generation in Japan is more enthusiastic about investing than their fathers and mothers. At SBI Securities Inc.’s brokerage unit, the number of accounts opened by 18-year-olds rose by 1,600 in April this year, a sharp increase from the 130 average for previous months. Since then, the pace of growth has been around 1,000 accounts per month.
However, there is no close cooperation between the main financial education actors. Nomura and other private sector companies make individual efforts, such as sending faculty to schools. But the Bank of Japan, the Financial Services Agency, the Ministry of Economy, Trade and Industry and the government agency responsible for consumer protection all work separately.
There’s only so much everyone can do, while there’s no uniform standard to ensure the quality of information, said fund manager Haruhiro Nakano, chief executive officer of Season Asset Management Co.
According to a survey by the Japan Securities Dealers Association, around seven out of ten Japanese believe that investing in securities is unnecessary. Recently, there has been a surge in retail investors complaining to the government that financial firms have tricked them into buying structured notes, which offer higher yields than regular debt but carry significantly more risk.
Satsuki Katayama, a lawmaker for the ruling Liberal Democratic Party, says she is considering introducing a bill to boost financial literacy in parliament next year.
Other countries are already ahead. In 2003, the USA set up a Financial Literacy and Education Commission, in which around 20 ministries and agencies participate.
Katayama says it would be desirable for “neutral” organizations to lead the push, as many banks and brokers offer advice to benefit themselves. One option would be to set up a third party organization under the country’s financial regulator to oversee financial education and let the relevant ministries and agencies review their work and set rules.
“Students are honest, innocent,” said Reiko Komeda, who teaches home economics at the high school. “I think it’s important for us to teach them with an open mind.”
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