By Ichiro Suzuki Following a smashing victory in the later October election, Prime Minister Kishida formed a new cabinet. Shortly after they are settled in the ministries, wealth of PM Kishida and the 20 cabinet members was disclosed. It was stunning, from a twisted perspective. These 21 men and women had an average ‘wealth’ of 97.3 million yen or $845,000. PM Kishida was ranked No.4 in the cabinet with 208 million yen ($1.81 million). Details of his assets are not known but they primarily consists of his house and bank deposits, which effectively pay zero interest. He has no investments in securities, bonds or stocks. His choice of assets represents typical Japanese households that are so risk-averse that totally shuns assets that don’t offer principal’s guarantee, even bonds. His lack of interest in risk assets is well reflected in his policies. Mr. Kishida appears to see securities investments as immoral, mere gambling or making money out of thin air, a view shared among some Japanese mothers. No wonder he openly spoke about raising tax revenue through securities transactions, either on trading levies or higher capital gains tax rates, against which the market reacted violently. He is clueless in in investments and the workings of the financial market. Even more stunning was the level of wealth of these supposedly well-off people. An average of 97.3 million yen ($845,000) among cabinet members is a kind of wealth looked upon with jealousy by average men and women on the Japanese street. Seiko Noda, minister for regional revitalization etc., topped the list with 280 million yen ($2.4 million) which sounds outrageous to many Japanese citizens. However, Ms. Noda is in fact ‘poorer’ than Democratic Socialist Senator Bernie Sanders who is reportedly worth $3 million. Of course there is a difference in per capita income between the two countries, after income in Japan has totally stalled over a generation. Japan’s household sector in aggregate owns 2 quadrillion (2,000 trillion) yen of financial assets. Nonetheless the wealthiest member of the cabinet has smaller assets than a Senator with an appearance of being remotely associated with money. Among the cabinet members of President Joe Biden, Transportation Secretary Pete Buttigieg is worth only $250,000, according to Celebrity Net Worth. However, Mr. Buttigieg is only 38 while Ms. Noda is 61, having been elected to the House of Representative for ten times. Mr. Buttigieg is for sure to be adding a zero to his net worth or probably a great deal more, by the time he hits 60. In 2016 while running for the president, Senator Sanders wrote a book ‘Our Revolution’ that turned out to be a best seller. Having a smash hit contributes greatly to one’s wealth, even for one hit wonder, since the U.S. is the largest consumer market by far. The book has made an impact on Mr. Sanders’ wealth. From a more broader perspective, per capita financial assets could be one macro factor that explains the wealth gap between the two countries. Per capita GDP of the United States, at $69,375 in 2020, is 70% larger than Japan’s $40,704. On the other hand, per capita financial assets at $303,096 for American is more than twice as large as $138,314 for Japanese. First, there is an income gap, and then there is a difference of stock market returns between the two. While the U.S. markets soared over the last 40 years after crushing the inflation in the early 1980s, the Japanese market has delivered very little since the end of the 1980s. On top of it, Japanese households in general are greatly more risk-averse than Americans, allocating much smaller portion of what they have to risk assets. PM. Kishida is a showcase of this risk-aversion. On top of her house and bank deposits, Ms. Noda has investments in a total of 18,843 shares for 10 companies though she is not required to disclose what companies they are. In the old days, politicians, especially those of the LDP, had a tradition of investing in construction and or real estate companies. These sectors not only provided great performances in the years of breakneck economic growth, but also were strong LDP backers that in turn depended on politicians for approval of their projects. Investments in these companies by politicians had a flavor of insider trading though there was no such concepts in Japan back then. Assuming Ms. Noda allocates half of her assets to stock investing, she would have 140 million yen ($1.2 million) in 18,843 shares. This translate to 7,430 yen ($64.6) per share on simple average. The Tokyo Stock Exchange is not crowded with companies that are worth over 7,000 yen per share, primarily due to Corporate Japan’s weak earnings power that has been persisting for a generation. Stock splits are so rare in Japan that the level of share price tells something about a company’s ability to make money. For instance, Toyota, the largest company in Japan, is 2,277 yen as of February 4 though the company is doing fine. On the other hand, Nissan, the struggling No. 2 car maker, is only 599 yen. Sony, the second largest company, is 12,600 and Nintendo is 58,180. Construction companies are not worth much more than 1,000 per share, at best. It looks that Ms. Noda is sitting on companies of reasonable quality, being away from speculative ones that Japanese politicians tend to prefer. (Of course, nothing prevents Ms. Noda from investing in companies outside Japan. Amazon, for instance, is $3,150 that could radically raise an average per share value of one’s portfolio. Japanese politicians have not done this, at least so far.) While cabinet members and Members of Parliament are required by law to disclose their assets, this requirement only gives a snap shot image of their assets on a particular day. They are not required to report anything on what they did between the latest report and the last one. Absence of such requirement allows politicians to be engaged in dubious trading activities that could constitute a conflict of interest, or insider trading at its worst. U.S. Senators and Congressmen and women are required to report their trading activities within 45 days. Though reporting on trading is not strictly enforced on the politicians in the U.S., such a regulation still contributes to greater transparency and the integrity of the financial markets. About the author: Mr. Suzuki is a retired banking executive based in Tokyo, Japan.