Understanding Japanese Household Portfolios

Why do Japanese households hold so few stocks? We use a quantitative
life-cycle portfolio choice model to argue in favour of two main explanations.
First, households have a very low level of trust in the stock market due to
Japan's history of poor corporate governance. Second, stock returns to
individual stockholders have been low. Before 1990, this was due to excessive
fees and commissions. Since the 1990 financial crisis, the Japanese market
itself has delivered low and volatile returns. Counterfactual analysis
suggests that, if sustained, recent improvements in corporate governance and
economic performance should lead to higher stock market participation.