Japanese Buy Cash Safes To Hide Trillions in Cash

From Bloomberg:

Japanese safe maker Eiko Co. says sales jumped more than 40 percent after the March earthquake and tsunami, a sign that consumers will hoard more cash at home and restrain an economic rebound.

“The television footage of the tsunami destroying everything in its path must have served as a warning for cash- rich people,” said Tsutomu Ishii, head of sales for the Tokyo- based company. “They have cash at home and they don’t want to leave it without any protection anymore.”

The March 11 disaster that left more than 23,000 people dead or missing may discourage spending as households stick to “tansu yokin,” the centuries-old Japanese practice of keeping mattress money. While output is bouncing back, weak demand may slow an economic recovery as officials struggle to boost consumer spending after decades of deflation.

“It’s absolutely essential for Japan to get people to spend,” said Robert Feldman, head of Japan economic research at Morgan Stanley in Tokyo. “Weakness in consumer spending is one of the reasons for the economy contracting -- it’s crucial for the government and the Bank of Japan to work together properly to end deflation.”

Consumer spending slid 0.6 percent in the three months through March as Japan entered a recession according to the textbook definition, two straight quarters of contraction. The Bank of Japan limited extra measures to spur growth to a 500 billion yen ($6 billion) lending program today as it raised its assessment of the economy, citing signs of a pick-up.

Japanese households had 55 percent of their 1,489 trillion yen of financial assets in cash or deposits at the end of last year, about four times the proportion in the U.S., according to the Bank of Japan.

Still, Prime Minister Naoto Kan’s efforts to drive a rebound are hampered by the largest debt burden of any nation. Moody’s Investors Service may downgrade its Aa2 rating for the nation because of faltering growth prospects and “a weak policy response,” the company said May 31.

The government is discussing raising taxes to fund earthquake reconstruction and social security, a prospect that may encourage consumers to set more money aside.

“Households aren’t ready to help the economy by spending,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo.

http://www.bloomberg.com/news/2011-06-13/strongbox-sales-soar-in-japan-as-demand-for-cash-risks-stunting-recovery.html