Earlier this month, Japan Post Holdings and its banking and insurance units listed on the Tokyo Stock Exchange, raising ¥1.44trn ($11.9bn), so far the largest IPO globally in 2015.
Only 11% of the company was floated, but the government intends to sell the shares down over time until it holds only one-third.
In a note to clients, WisdomTree Europe said it believes the privatisation has “the potential to mark the start of a genuine revolution in Japan’s services sector, and financial services sector in general.
“After all, Japan Post is Japan’s largest employer, it controls more branches and ATMs than all the private banks combined and is the second-largest holder (after the Bank of Japan) of government bonds.”
A revamp is also underway. Post Bank, with total assets of ¥209trn, this year hired two former Goldman Sachs Japan employees, one as its chief investment officer. It plans to diversify away from Japanese government bonds, which account for most of its holdings.
WisdomTree noted that Japan Post Bank seems to be taking a cue from GPIF, Japan’s (and the world’s) largest pension fund, which has already begun an institutional overhaul.
Post Bank’s senior management “is very vocal about wanting to promote an active and diversified asset management culture, which suggests a portfolio rebalancing away from government bonds and toward domestic equities and global securities”.
The firm noted that because Post Bank has a retail network of 24,000 branches, the transformative story is not just about the potential for institutional buying of more equities.
At least two-thirds of Japan’s net financial wealth is in cash or demand deposits and Post Bank could activate this retail investor base.
“Senior management is openly seeking to leverage this branch network, looking to provide a potentially new range of financial products to the mass market retail investor.
“The privatisation may finally bring about the long-awaited shift of Japanese retail assets out of deposits.”
WisdomTree reckons that a 1% shift in asset allocation yields about ¥2trn of new buying.
“If this were followed by a mere 0.25% shift in aggregate household financial asset allocation, another ¥4.29 trillion would follow. The scale of this is massive, as it adds up to roughly the total shift in the GPIF’s asset allocation toward equities over the past 15 months.”
