Japan's households cut cash holdings by 3.4%

Japan's households are reducing their cash savings at a record speed. Recent data from the Bank of Japan indicates that cash holdings dropped to ¥105.3 trillion ($707 billion) in the last quarter of 2022. This is a decline of 3.4% compared to the previous year, marking the most significant drop since records began in 1998. The decrease in cash is likely due to two main factors. First, many people are shifting towards cashless transactions. Second, inflation has led to an increase in nominal consumer spending. Unlike during the COVID-19 pandemic, when cash savings grew, households now seem to be adapting to rising living costs. Economists are observing how households are changing their cash behaviors. Some are concerned that money kept at home, often referred to as "mattress money," might lose value if it is not invested or stored in a bank account. The report also revealed that household investments in trusts reached a record high, indicating more interest in financially productive options. Additionally, holdings of Japanese government bonds increased significantly, the highest jump since 2007. In early reports, Japanese inflation was noted to rise faster than expected, staying well over the Bank of Japan's 2% target. Consumer spending without adjusting for inflation reached a record ¥332.9 trillion last quarter.