Staff writer Are the Japanese changing the way they save money, turning to risky but potentially rewarding financial investments? The rising popularity of investment trusts may provide a clue. Net assets of investment trusts, or mutual funds, amounted to 53.3 trillion yen at the end of November, up 25 percent from December 1998 -- the largest amount since the 58.6 trillion yen recorded in 1989 at the height of the asset-inflated bubble economy. As a backdrop, fund sales by banks as a result of the deregulation introduced in December 1998 have brought the hitherto unfamiliar financial products closer to consumers. But according to a popular fund analyst, Kumi Fujisawa, the single biggest driving force has been the rebound the Japanese stock market experienced in 1999. Fujisawa also said 1999 has been a historic year as many Japanese, increasingly concerned about job security and the future, became serious about investment trusts. Fujisawa jointly founded IFIS Inc., Japan's first fund-rating firm, in 1996 and sold it to Standard & Poor's, an American credit-rating company, in August 1999. She currently serves as a director of S&P fund services in Tokyo. In an interview, she analyzed recent moves surrounding investment trusts and their implications for 2000. The following are excerpts: How was 1999 for investment trusts? It was the year that helped revive investment trusts. It was the year when people began talking about investment funds and buying them with correct knowledge. There were no such people before; now there are at least some. It was effectively "Year One" for investment trusts. What was the biggest event during the year since bank deregulation? A rise in Japanese stocks. If the stocks had not risen, then probably nothing would have changed. Star fund-managers and flagship funds have been emerging because of rising stocks. Do you see any change in the saving attitudes of the Japanese? Yes. Especially people in their 30s and 40s. More and more people feel they can't count on pensions. The storm of corporate restructuring has eroded their confidence in their future money. They began to think, "I have to do something." The very low interest rates (on bank savings) are certainly a factor, but more importantly, concerns about the future have prompted many of them to try investment trusts. The growing number of certified financial planners reflects the increasing numbers of these types of people. Many housewives are taking tests to get qualified. After qualifying, they attend study groups and learn more about investment trusts. Do those housewives become professional? They don't do it for a living. Many women tend to simply seek qualifications when they feel the need to act. Men are interested in investment trusts but tend to quickly switch to stock investment. They first buy investment trusts, particularly Japanese-stock funds, but after discovering that the prices of individual stocks rise faster than funds, they get greedy and begin investing directly in stocks. Does that mean they are getting used to investment risks? They are not experiencing real risks because stocks have been rising. They feel as if they are managing risks. This is a very worrying phenomenon. Is that trend true of investment trust buyers as well? Yes, and it is my biggest concern. To manage risks, what you must do is make long-term investments and diversify your portfolio. But many people are doing neither -- they buy and sell funds in the short term and buy Japanese-stock funds only. This is a common feature of those who only bought Japanese-stock funds in the 1980s, saw the prices plunging in the 1990s, and hate investment trusts now. Had they diversified their investment by also buying American and European-stock funds, they could have increased their assets by perhaps 10 times. How do you think this type of "risky" investment will turn out in 2000? Some will have to do some soul-searching if there is a correction in the market (meaning a temporary fall in stocks), which I think will probably happen. Wouldn't the "soul-searching" dampen the popularity of investment trusts? It sure would. But investment is just like one's life: no one leads a life in which everything goes well. Some people try investment trusts, become dejected and come to hate funds. Yet those who have learned a lesson or two will come back and buy funds. What changes are occurring in the investment trust business? I think sellers are the biggest problem in this business. Take securities firms, for example. They said throughout the 1990s that they would shift their emphasis to customer consultation and increase net assets of funds by recommending long-term investment. But when stock prices began surging last spring, most brokerages returned to commission-seeking sales that encouraged customers to switch funds frequently. How have banks changed since they began selling funds? At the beginning, I thought it would not work. If you tried to buy funds at banks, they just emphasized risks and hesitated to sell (relatively riskier) stock funds, but recently, they have even been recommending stock funds because stock prices have gone up. However, from conversations with workers at banks' headquarters, I have noticed that they never buy funds. How can you recommend something to customers that you have never bought? In normal retail business, sellers usually taste or try on goods before selling them and tell customers what's good and bad about the goods. If that's the case, where should people buy funds? At the moment I recommend online brokers because some banks ignore customers who spend less than 500,000 yen on funds. It may take you some courage to buy only a 10,000 yen fund after consulting with these banks. At online brokers, sellers don't frown, even if you buy a 10,000 yen fund. And you can send questions by e-mail and receive written -- and therefore reliable -- responses. But it should take time before online trading takes root in Japan, where many people still don't feel at ease buying investment trusts. New "defined-contribution" pensions similar to 401(k) plans in the United States, to be managed mainly in investment trusts, are expected to be introduced in late 2000. Tax incentives for participants in the plans were included in the government tax-reform package formalized in December 1999. Will the scheme boost the investment trust market? Those half-baked tax incentives are not going to help defined-contribution pension plans take root in Japan. The scheme would have given individuals a tool to manage their own pensions that complement public pensions. I am really disappointed with the tax reform package. I think a structural change in society will have a greater impact on the investment trust market. Increasing mergers and subsequent massive restructuring in the financial industry, for instance, are threatening job security. That will increase the number of people who worry about the future. Then they will consider financial investment. The more unemployed there are, the more seriously people think. It is, however, a painful process.