Japan wealth down despite Abenomics: Credit Suisse

Japan may have received a major boost from Abenomics earlier this year, but it was the only Asian economy to suffer a drop in household wealth in the year to June 30.

Household income in Japan fell by 20.5% from June 2012 through June 2013, due to 22% depreciation of the yen in the same period, finds Credit Suisse research.

Excluding Japan, Asia-Pacific wealth rose by $3 trillion, hitting $51.3 trillion in the same 12-month period.

Despite Japanese household wealth falling by $5.8 trillion in the year to June 2013, in absolute yen terms the country’s wealth actually increased 2% in that time.

Credit Suisse expects the country to enter an inflationary period by the end of 2014, which will boost both financial and real estate asset prices.

Meanwhile, strong equity and property markets helped to boost Hong Kong household income 8% in the 12 months to June 30.

Hong Kong’s total household wealth hit $928 billion through the middle of 2013, meaning an average of $153,310 per adult.

Credit Suisse attributes Hong Kong’s growing household wealth – the value of financial assets plus real assets, which includes real estate, minus household debt – to positive stock market performance and appreciating property prices.

From June 2012 through June 2013, Hong Kong financial asset prices increased 7%, while property prices in the territory appreciated 17%, says Fan Cheuk Wan, Asia-Pacific chief investment officer for private banking and wealth management at Credit Suisse.

“That’s quite a substantial capital gain,” Fan tells AsianInvestor. “But we don’t expect the same property price appreciation to keep coming next year. The Hong Kong property market has already entered a consolidation phase.”

A number of Hong Kong property developers have started to dispose of unsold properties and have been cutting prices to do so, Fan says. Credit Suisse forecasts Hong Kong property prices will fall by single digits next year, with luxury apartments experiencing the sharpest corrections.

“We’re relatively cautious about the Hong Kong property market,” she says. “It’s likely to stay in a consolidation phase. It’s more attractive to invest in Hong Kong property equities than physical real estate.”

In the 12 months to June 30, 54% of Hong Kong’s household wealth was held in financial assets, while household debt averaged $44,590 per adult.

The city now has 103,000 millionaires, a 9% increase over last year. Credit Suisse forecasts the number of local millionaires will rise to 168,000 by 2018. Of these high-net-worth individuals, 1,144 have assets of over $50 million, and 514 of over $100 million.

Globally, North America became the wealthiest region for the first time since 2005, gaining $8.4 trillion, bringing total wealth to $78.9 trillion.

Europe, despite its economic challenges, added $5.5 trillion to household wealth, with the average wealth per adult recovering more than half of the losses suffered during the previous 12 months. This is a result of rising equity prices.

The top contributors to global wealth growth were the US, which experienced an $8.1 billion trillion rise; China ($1.4 trillion); and Germany ($1.2 trillion).

Credit Suisse predicts global wealth will rise by 39% to $334 trillion by 2018. Emerging markets will account for 29% ($93 trillion) of that, with China making up half that amount. The bank expects Asia Pacific to surpass North America as the world’s wealthiest region by 2017 onwards.