[Explainer] Is Leaving Your Money in the Bank a Losing Move? How 1 Million Yen Turned Into 880,000 in Real Terms, and How to Invest in an Inflationary Era

Hey everyone, Hirokichi here.

“Investing is scary, so I will just leave my money in the bank.” A few years ago, that was almost the right answer. But in 2026, money sitting in a savings account is quietly losing value.

Today I want to settle the question: is just keeping your money in the bank actually a losing move? I will use official statistics and simulation charts, and then walk through how to invest in an inflationary era in a way that beginners can follow.

1 million yen saved in 2020 is worth about 880,000 in real terms in 2026

Let’s start with the reality. According to Japan’s Consumer Price Index (a statistic that tracks the price level of goods and services), the all-items index for June 2026 was 113.6 with 2020 set at 100 (source: Ministry of Internal Affairs and Communications, CPI for June 2026).

In plain terms, what cost 1 million yen in 2020 now costs about 1,136,000 yen. Flip that around: 1 million yen left in a bank account since 2020 is worth roughly 880,000 yen in purchasing power (1,000,000 divided by 1.136). About 120,000 yen quietly disappeared in six years.

Looking at the chart above, the real value starts sliding clearly from 2022. Deposit rates were close to 0% back then, so interest could not fill the gap at all.

Even at 0.4%, the real interest rate on savings is still negative

“But rates have been going up lately, right?” That is true. At its June 2026 policy meeting, the Bank of Japan raised the policy rate from 0.75% to 1.0% — the highest level in about 31 years, since September 1995 (source: Tokio Marine Asset Management market report). Following that, Japan’s three megabanks announced they will raise savings account rates to 0.4% from August 2026.

If you remember the era of 0.001% interest, 0.4% looks like huge progress. But the number you have to compare it against is the inflation rate.

If prices rise 1.7% a year while your deposit earns 0.4%, you lose about 1.3% of purchasing power every year. That is what a negative real interest rate means. Your balance goes up, but what you can buy goes down. The fact that it never feels like a loss is, in my view, the trickiest part of inflation.

For reference, real wages (pay growth after stripping out price increases) were up 1.4% year on year in May 2026, the fifth straight monthly gain (source: Ministry of Health, Labour and Welfare, Monthly Labour Survey). So wages have caught up with prices. Deposits have not. That is the picture right now.

If 2% inflation runs for 30 years, 1 million yen becomes 620,000 in real terms

The Bank of Japan targets 2% inflation. So 2% is not an emergency scenario — it is the baseline we should plan around.

The chart above simulates what happens if you leave money in a 0.4% savings account while inflation runs at 2% a year. The nominal balance (blue) grows to 1.12 million yen over 30 years, but the real value (red) falls to 620,000 yen.

The gap between the blue and red lines (the shaded area) is exactly the purchasing power you lose without noticing: about 15% over 10 years, 27% over 20 years, and 38% over 30 years. For money you think about on a 20 to 30 year horizon, like retirement savings, keeping it all in deposits is itself taking a risk.

I wrote more about how time can work for you or against you in Compound Interest Starts to Feel Real at 10 Million Yen, and Explodes at 30 Million Yen.

What holds up against inflation? A 2.4x gap after 20 years

So where should the money go? The chart above compares the real value of the same 1 million yen after 20 years. A savings account at 0.4% leaves you with 730,000 yen, a floating-rate 10-year JGB for individuals at 1.80% leaves 960,000 yen, and a stock index at an assumed 5% leaves 1,790,000 yen.

That is a gap of more than 2.4 times between the savings account and the stock index. The logic is simple: does the return beat the inflation rate (2%) or not? Above it, you gain in real terms. Below it, you lose.

For reference, the S&P 500 (the main U.S. stock index) has returned roughly 9-10% a year over the past 30 years, and still 6-7% a year after adjusting for inflation. Past results guarantee nothing about the future, but it is worth knowing that ways to outpace inflation do exist.

Here is how the main options compare.

Three steps you can start today

You do not need to move everything into investments at once. Here is the order I would suggest.

Step 1: Keep your emergency fund in deposits

First, park six months to a year of living expenses in a savings account. This is not where you grow money — it is where you buy peace of mind you can withdraw anytime. It is fine if inflation nibbles at it a little. You can see how much Japanese households typically hold in How Much Do Japanese People Save? Comparing Single vs Two-or-More-Person Households by Age.

Step 2: Start index investing through NISA

Once the emergency fund is set, put the rest into the tsumitate (regular investment) allowance of NISA, Japan’s tax-free investment account. Buy a global or U.S. equity index fund with a fixed amount every month. Even 10,000 yen a month is a real start.

NISA is no longer an unusual choice. Japan’s Financial Services Agency reported about 28.26 million NISA accounts as of the end of December 2025, with cumulative purchases of roughly 71 trillion yen (source: FSA survey on NISA account usage). The share of cash and deposits in Japanese household financial assets has also fallen to 47.2% as of March 2026 (source: Bank of Japan Flow of Funds statistics). The shift from saving to investing is actually happening.

Step 3: Money with a set spending date goes into JGBs and similar

A car in three years, a home renovation in five. When both the purpose and the timing are fixed, stocks can leave you short depending on the market. JGBs for individuals (the floating 10-year yields 1.80% for the July 2026 issue) or time deposits fit better here. When rates are rising, the floating type — reset every six months — has the edge.

Deposits still matter: separate money to protect from money to grow

I have spent this whole article on the weak points of deposits, but deposits are not bad. They have strengths investments simply cannot replace: the principal does not fall, and you can use the money instantly. The problem is putting all of it there.

Three things I want to keep an eye on from here.

(1) Further BOJ rate hikes. If the policy rate climbs again, deposit rates follow — but whether they clear the inflation rate is a separate question.
(2) How inflation settles. Energy and food prices swing the numbers around, so I would rather watch the yearly trend than one or two months.
(3) Your own cash ratio. Work out what percentage of your total assets sits in cash and deposits. If you have no benchmark, Japan’s average of 47.2% is a reasonable starting point.

Personally, I keep my emergency fund in deposits and put everything else into NISA and U.S. ETFs. I post the monthly numbers in my full record of monthly asset updates if you want to see real figures. I also covered the risk of not investing at all in Saving Alone Could Cost You: The Hidden Risk of Not Investing in an Inflationary Era.

To sum up: keeping money in the bank is not a loss by itself. The loss comes from leaving all of it there, untouched, for years. In an inflationary era, holding nothing but deposits is the biggest risk of all. Start with 10,000 yen a month and build from there.

Let’s keep at it, slow and steady. See you next time!

日本語版はこちら → 【解説】銀行にお金を預けるだけは損？100万円が実質88万円になったインフレ時代の投資術

* This article is for informational purposes only and does not recommend any specific investment. Please make investment decisions at your own responsibility.

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