The second instalment of the Julius Baer Wealth Report: Japan coincided with the approximate two-year anniversary of the start of Abenomics, presenting a good opportunity to examine the progress made under this comprehensive new policy framework. Successful implementation of anti-deflationary policies has set the Japanese economy and prospects for wealth creation onto an upwards trajectory and real change can be seen in Japan’s economic and financial structures.

The report recognises the relative shift taking place in favour of services in Japan, supported by strong profit growth and productivity-enhancing measures. These steps appear to be helping address the impact of Japan’s singular demographic profile, which has an inherently deflationary component. Consumption patterns are also changing as a result of these demographic trends, pointing to new opportunities of growth.

The report also provides analysis of the Julius Baer Lifestyle Index, demonstrating how these changes are being experienced on the ground. 2015 is the second year that Tokyo has featured in the Lifestyle Index, launched in 2011 to track the cost of living for HNWI in eleven Asian cities. This year’s report finds that 13 of the 20 items covered had price increases that compensated for the decline in the yen over the relevant period. Relative to other cities in Asia, the Tokyo sub-index showed a high degree of variability in year-on-year price changes.

Overall, the record of the past two years creates significant room to be optimistic about Japan’s growth trajectory and the all-important transition from a deflationary to an inflationary environment. While manufacturing tends to garner the most attention, the greater role of services in Japan’s economy over the coming decades will likely be key to enabling growth and wealth creation, as the composition of both supply and demand in the economy change.

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