Changes in Equity Investment of Japan's Households After the Introduction of Defined Contribution Plans

Compared to other advanced economies, Japan's households allocate fewer financial assets to equity investment. We examine the possibility that the introduction of self-directed defined contribution plans could stimulate more equity investment by exposing investors to investment education and experience in equity investment. Using original data obtained from individual investors, we analyze factors associated with current and expected future equity allocation. Results indicate that although DC plan participation has no significant effect on current equity allocation, it significantly increases the expected future equity allocation. Financial asset holdings have a significant positive effect on current and expected future equity allocation. Interestingly, however, subjective expectations of future income and pension benefit, which are key factors in the life cycle model, do not have any significant impact.