Aging Japanese Prove Rich Pickings for Investment Fraud

http://www.bloomberg.com/news/print/2015-01-21/aging-japanese-prove-rich-pickings-for-investment-fraud.html

Aging Japanese Prove Rich Pickings for Investment Fraud

By Masaaki Iwamoto – Jan 21, 2015

A growing number of retirees in Japan are falling victim to fraud, underscoring a downside of promoting personal investment in the world’s most aged nation. Combating the problem is a rising challenge for the government of Prime Minister Shinzo Abe, as it encourages Japanese households to shift more of their 1,654 trillion yen ($14 trillion) in assets out of savings accounts and into investments that boost the economy.The rally in Japanese stocks that’s bolstered wealth for shareholders has also rekindled interest in riskier investments among some retirees — many of whom retreated from the market more than two decades ago when the country’s asset-price bubble burst. Surging equities contrast with annual returns of about 0.02 percent on savings accounts at Japan’s biggest banks.

“Old people can’t tell an investment from a fraud. They’re not financially literate,” says Tetsuro Arai, a lawyer at the Aoi Law Office in Tokyo, which specializes in helping fraud victims get their money back. “The government’s campaign to encourage older people to start investing means a growing number of them are getting trapped by scams.”

People over 60 were the victims in more than 90 percent of the 1,875 cases of fraud in financial instruments identified by the National Police Agency in 2013, the most recent figures show. Preliminary data for the first half of last year shows the trend continuing.

The number of offenses, which jumped from 112 cases reported in 2010 when police first began compiling these figures, included the sale of unlisted stocks, corporate bonds and other securities that had little value or didn’t exist at all.

Undetected Cases

Losses in 2013 amounted to 17.9 billion yen, the police estimate. Data from the National Consumer Affairs Center show 17 percent of victims invested more than 10 million yen.

Arai said the number of undetected cases may exceed 100,000 annually.

Police, who arrested 479 people for these kinds of crimes in 2013, are running awareness campaigns about the dangers through posters at banks and face-to-face meetings with the elderly.

People 60 or older account for more than 33 percent of the population in Japan, and the figure is set to rise to about 39 percent by 2030, increasing the pool of potential targets of fraud.

To contact the reporter on this story: Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net

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