The majority of Japanese Government Bond (JGB) holders are from the public sector, commercial banks, and insurance companies.

More than half of outstanding Japanese Government Bonds (JGBs) are in the hands of the public sector, including postal savings and postal insurance; Fiscal Loan Fund; Social Security Fund; and the Bank of Japan. Other major JGB investors include commercial banks and private insurance companies, which hold more than 30% of total outstanding JGBs. Household and foreign investors hold less than 15%.

The bulk of local currency corporate bonds and bank debentures are held by private financial investors.

Pension Funds

Japan’s pension market is the second-largest in the world, with total assets estimated by the Bank of Japan (BOJ) to be JPY320 trillion as of September 2005.

Public pensions held JPY218 trillion in total assets, primarily through the Government Pension Investment Fund (GPIF). For 2005, the GPIF’s portfolio asset allocation comprised 75% domestic bonds, 8% domestic stocks, 6% foreign stocks, 5% foreign bonds, and 6% in short-term instruments. The GPIF is required to set aside substantial amounts for the acquisition of Fiscal Investment Loan Program (FILP) bonds issued by the Financial Bureau. The GPIF held an outstanding balance of JPY31 trillion in FILP bonds as of September 2005.

Insurance Companies

Japan’s insurance industry comprised 38 life insurers (four foreign) and 48 nonlife insurers (22 foreign) at the end of 2005. The insurers had combined assets of JPY233 trillion as of September 2005, of which life insurers accounted for 85% of the total.

The three leading private life insurance firms controlled more than half of the market in terms of assets as of September 2005, with a combined market share of 52%. The top firms in the much smaller nonlife insurance sector had a combined market share of 76%. According to the Life Insurance Association of Japan, the market share of foreign life insurers is growing, and an increasing number of tie-ups and joint ventures between foreign and Japanese insurers, as well as outright foreign takeover of local firms, continue to help maintain a level playing field.

Loans and securities comprised 89.3% of life-insurance company assets as of September 2005. The proportion was 82.8% for nonlife insurers.

Asset Management Companies

Asset managers are typically associated with securities companies, insurers, trust banks, and investment trust managers. Major life and nonlife insurers operate asset-management arms. These include Asahi Life Asset Management, Meiji Dresdner Asset Management, Nissay Asset Management, Sompo Japan Asset Management, Tokio Marine Asset Management, and Yasuda Asset Management. Trust banks have their own array of asset-management arms. Other commercial banks, many of which have merged with one another, are trying to strengthen operations in the private-banking and wealth-management sectors by providing an array of specialized services for individual clients, often in collaboration with foreign firms.

BOJ estimated that Japanese households owned JPY1,454 trillion in total financial assets as of September 2005. The sheer size of household financial assets makes asset management an attractive market in Japan. A vast portion of personal financial assets remains underutilized: 53% of assets were held in cash, and another 27% were in insurance claims and pension reserves. Securities such as equities, bonds, and investment trust holdings, accounted for only 16%. The remaining 4% was held in other unspecified assets. Total financial assets held by the corporate sector, excluding financial institutions, were JPY816 trillion.