Volatile markets in Japan test Kishida's push to change Japanese investor trends

Fumio Kishida's investment strategy became more relevant as the Tokyo stock market suffered a historic slump.

As the world's fourth-largest economy faces an aging population, Prime Minister Fumio Kishida wants to turn Japan from a saver-dom to an investor-dom. The current market volatility has emerged as a test case for this goal.

Yuri Sekiya, 49, spent Tuesday morning in Tokyo's Shinjuku neighborhood learning about NISA accounts—the government's tax-free initiative intended to redirect idle wealth into shares and mutual funds—at a brokerage lecture as stocks were rising.

According to Sekiya, a part-time educator, she believed that the market would rise more steadily following the decline, so perhaps this was a good moment to establish a NISA. Although she created her NISA account this year, she had been cautious and had not made any investments.

After decades of fighting deflation and stop-start growth, Japan is finally exhibiting subtle signals of change everywhere: prices and salaries are rising, and the central bank is raising interest rates for the first time in many years.

Kishida's economic reforms, or "new capitalism" agenda, which aims to increase household wealth after years of loss, have made the NISA, which was initially introduced in 2014, a cornerstone.

Tuesday saw a 10% increase after the Nikkei benchmark index fell more than 12% on Monday. Market players said that a major factor in Monday's drop was panic selling, particularly by more experienced retail investors who were trading on margin, or using borrowed money.

Data from the Tokyo Exchange revealed a record amount of shares purchased on margin in July—hazardous tactics that can boost profits but also magnify losses during a slump.