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Strongbox Sales Soar in Japan as Demand for Cash Risks Stunting Recovery

Source: The Asahi Shimbun via Getty Images

Safes salvaged from the rubble are gathered at a police station on April 4, 2011 in Iwate, Japan. Close

Safes salvaged from the rubble are gathered at a police station on April 4, 2011 in Iwate, Japan.

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Source: The Asahi Shimbun via Getty Images

Safes salvaged from the rubble are gathered at a police station on April 4, 2011 in Iwate, Japan.

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.

Nuclear Crisis

The International Monetary Fund last week urged the central bank to boost asset purchases to “guard against deflation risks and support the recovery.”

An unresolved crisis at Tokyo Electric Power Co.’s Fukushima Dai-Ichi nuclear plant is weighing on sentiment. Sentry Japan Ltd., a unit of Rochester, New York-based Sentry Group, says its sales of portable water- and fire- proof models, costing about $100, have increased more than five times since the disaster.

In the devastated northeastern Tohoku region, safes recovered since the data have indicated the scale of tansu yokin. In Ishinomaki, a stricken city, about 700 are stored at a police station, officer Yoshiaki Fukushima said. Officials there have reports of another 750 missing, claimed to contain an average of about one million yen each.

“I was stunned by the amount of cash I was seeing,” said Fukushima, who found as much as 70 million yen ($870,000) in one of the boxes. In another case, he couldn’t get the bills out because they were swollen with water.

Police Tally

At least 500 are at a police station in Kesennuma city, and one contained as much as 40 million yen in cash, said Hiroki Sato, a local police commissioner.

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.

In 2008, the central bank estimated tansu yokin at about 30 trillion yen and Hideo Kumano, chief economist at the Dai-Ichi Life Research Institute in Tokyo, said the amount may now be in a range from 20 trillion yen to 45 trillion yen.

“The country is in deflation so even if you leave money under the mattress, you are still earning,” said Morgan Stanley’s Feldman. “It’s a relatively attractive asset. You have to protect it but it’s not too hard.”

Average monthly household spending dropped 8.5 percent in the past decade in nominal terms, according to the statistics bureau.

Avoiding Stocks

Poor returns on stocks -- the Nikkei 225 (NKY) is down more than 30 percent in the past five years -- discourage investing, while low interest rates limit the lure of bank saving accounts. At the Bank of Japan, Governor Masaaki Shirakawa’s policy board has kept the benchmark between zero and 0.1 percent since October.

The economy is showing signs of recovering, with industrial output expanding in April after a record plunge in March and Shirakawa saying that repairs to supply chains have been swifter than expected. Sekisui House Ltd., the nation’s second-largest home builder, said last month that reconstruction work may spur the nation’s biggest housing boom in at least 15 years.

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.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst in Hong Kong at ppanckhurst@bloomberg.net

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