According to the Bank of Japan (BOJ), the rising inflation and interest rates will likely increase the demand for novel financial solutions. An executive from the bank mentioned that Japan needs to focus on digitalisation of its financial services to cater to the demand of households.
According to Reuters, Japanese households have financial assets worth 2,200 trillion yen ($14 trillion); more than half of these assets are held in cash and deposits.
Not just in households but also among companies in Japan, there has been an increase in the demand for digitalised financial solutions that facilitate mergers, acquisitions, and corporate restructuring.
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BOJ Executive Director Hirohide Kouguchi mentioned, “Along with rising inflation, interest rates are also rising moderately. This has increased (the) demand for new financial services. It is likely that there will be a greater need for diversified investment of financial assets to hedge inflation risk.”
He further claims that advanced technologies with enhanced information processing capabilities will enable the financial industry to address the evolving needs of households and businesses.
Interest Rates & Inflation Rate
The Bank of Japan ended its decade-long aggressive stimulus program last year and recently raised short-term interest rates to 0.5%, anticipating that inflation is nearing a stable 2% target.
Meanwhile, data released on Friday revealed that core inflation in Tokyo surged to 2.5%, the fastest annual increase in nearly a year. This figure surpasses the BOJ’s 2% target, reinforcing market expectations of potential further interest rate hikes.
