Measuring the Wealth Effect of Rising Equity Prices in Japan

Goldman Sachs reports that Japan's wealth effect from rising equity prices has increased to a 0.3pp consumption boost for every 10% market gain, largely due to the NISA investment scheme. This trend is expected to support a consumption recovery despite geopolitical energy risks.

Key Takeaways

• 1.The wealth effect of rising equity prices in Japan has tripled since the 2014 launch of the NISA tax-exempt scheme, with a 10% rise in stock prices now boosting consumption growth by approximately 0.3 percentage points.
• 2.The wealth effect is most pronounced in semi-durable goods (high-value items like luxury bags) and services (travel/dining), whereas it is negligible for non-durable goods like food.
• 3.Despite near-term pressure from energy price shocks and Middle East conflict, record-high equity prices are expected to drive a recovery in private consumption.

Table of Contents

• As Share Prices Rise, the Proportion of Equities and Investment Trusts in Household Financial Assets Is on an Upward Trend
• A 10% Rise in Equity Prices Boosts Consumption Growth by About 0.3 pp, With the Wealth Effect Particularly Large for High-Value Goods and Services Consumption
• Consumer Confidence Is Worsening, but Rising Equity Prices Could Drive a Post-Oil-Shock Consumption Recovery
• Japan Main Economic Forecasts

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