Japan mutual fund market grows by record $168 bln in 2013

TOKYO Fri Jan 17, 2014 3:47am EST

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TOKYO Jan 17 (Reuters) - The Japanese mutual fund market grew by a record amount in 2013, boosting overall asset size above 80 trillion yen ($772.20 billion) for the first time in more than six years as strong equity prices and a weaker yen spurred solid inflows.

Net inflows into the mutual fund market by cash rich Japanese retail investors rose by almost six times from a year earlier to 10 trillion yen, helped by falls in the yen and aggressive economic stimulus by Prime Minister Shinzo Abe and the Bank of Japan.

The asset value of the mutual fund market, which is the second largest in the Asia-Pacific region after Australia and the ninth largest in the world, rose by a record 17.5 trillion yen ($167.88 billion) yen, or 27.3 percent, to 81.5 trillion yen by the end of December -- the highest since October 2007, the Investment Trusts Association of Japan said.

This is a major comeback after the financial crisis triggered by the bankruptcy of Lehman Brothers hammered down the market's value to as low as 49.6 trillion yen by January 2009.

Retail investors poured huge amounts of money into foreign high yield funds, real estate funds and exchange-traded funds in 2013, while unloading foreign equity funds and multi-asset balanced funds, the association said.

Fumio Inui, vice president of the association, said the outlook for the domestic mutual fund market is bright, backed by the yen's weakness and strong equity prices.

"There is a strong chance to see more money pouring into the market as the weakness of the yen is expected to help boost performance and lift the asset value, as many funds are foreign currency-denominated funds," Inui told a news conference.

About 40 percent of the mutual funds are foreign currency- denominated. The yen fell about 22 percent against the U.S. dollar last year.

The association has high hopes for the asset value to top an all-time high of 82.15 trillion yen reached in October 2007 with the launch of a tax-free investment facility dubbed NISA, for the Nippon Individual Savings Account this month.

"The introduction of NISA is expected to bring up net inflows strongly this year," Inui said.

The Japanese Securities Dealers Association estimates about 4.4 million Japanese have opened such NISA accounts by Jan. 1. The government projects NISA accounts could draw more than $250 billion by 2020. ($1=104.2400 Japanese yen) (Reporting by Chikafumi Hodo; Editing by Clarence Fernandez)

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