Opinion

Investing Pachinko-Style

By GWEN A. ROBINSON

When Japan's stock market was plunging early this year, a visiting American friend of mine expressed amazement at the general lack of public alarm. If this were New York and the stock market were crashing, he said, you'd really know about it; everyone would be talking.

That reminded me of the remarkable disparity in stock ownership between the U.S. and Japan. Equities, or stocks, represent little more than 6 percent of the financial assets directly held by an average Japanese household. That compares with about 20 percent in the U.S. Of course, most Japanese indirectly invest in capital markets through the country's massive pension funds and life insurers.

But in terms of direct investment decisions, ordinary Japanese seem content to put their money into postal savings or other large institutions and then let those institutions make the real investment decisions. This is what produces another striking disparity: Japan's personal savings rate overwhelms that of all other advanced countries.

This conservative approach to savings and investment might indicate a cautious attitude toward money in Japan. A reluctance to gamble perhaps? But then, look around at the tremendous following which pachinko, commonly referred to as "Japanese pinball," has developed.

First-time visitors to Japan are always surprised to see these gaudily decorated emporiums dotted throughout every city. The visitors are particularly bemused to hear about the informal gambling structure ― how prizes can be converted under-the-counter into cash.

According to recent news articles, pachinko is now drawing an increasingly diverse range of Japanese customers, from young mothers to teenagers. Could this indicate a growing recklessness?

I think it is just another result of the country's attitude toward investing. When you make the silver balls whirl around in a pachinko machine, you're taking a risk with your money, sure. But it's the sort of risk that carries no responsibility. There are few decisions required in the playing of pachinko except whether you're going to put more money in or not. That's the same as putting all your money in a large institution which makes all the investment decisions for you.

And now, as more financial institutions collapse or founder as a consequence of their bad decisions, many more ordinary people are losing. Directly investing in a stock market, or any other form of capital market, means taking on responsibility. You have to make your own decisions about when and what to buy and when to sell.

In Japan I think the day is still far off when falling stock markets will draw strong reactions from the general populace.

Shukan ST: Feb. 7, 1997

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