With long-term interest rates starting to show upward movement buoyed by the economic recovery, new financial products with variable rates are drawing attention from individual investors.
The Finance Ministry in March 2003 began selling new government bonds specifically designed for individuals through post offices and financial institutions.
But sales of the bonds, carrying half-yearly floating interest rates, were slow last summer, as a rise in interest rates was unthinkable.
This June, however, post offices sold their quotas of the new government bonds in only eight days after accepting subscriptions.
Though the initial interest rate on the June issue was still low at 0.74 percent, individual investors bought the bonds aggressively in expectation of higher interest rates ahead.
Interest rates have been kept at record-low levels for a long time, making individual investors all the more sensitive to rate movements, a market watcher said.
Another popular financial product is Sompo Japan Insurance Inc.’s “Dr. Japan,” a new type of medical insurance with variable interest rates.
The Tokyo-based insurance company launched the product in July and achieved 25 percent of its annual sales target that first month.
Under the plan, if market interest rates rise more than 0.5 percentage point in three years after the purchase of the policy, the assumed rate of interest will be reviewed and raised, resulting in a decrease in insurance premium payments.
For instance, in the case of a 35-year-old man, the assumed rate of interest is 1.5 percent and the monthly premium is 2,590 yen.
If the assumed rate of interest is raised to 2 percent as a result of a rise in market interest rates in three years after the purchase of the policy, the monthly premium decreases to 2,425 yen.
Inflation-proof financial products are also drawing attention, reflecting rising inflation worries touched off by higher prices of crude oil and other commodities.
Dai-Ichi Kangyo Asset Management Co. in June launched an inflation-indexed government bond fund whose principal and interest change along with movements in prices.
The fund originally targeted corporate customers, but the company has reduced the minimum purchase unit to 100,000 yen at the request of individual customers.
The product is now being sold to individuals through SMBC Friend Securities Co. and other brokerages.
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