The Japanese are hoarding over $300 billion under their mattresses and that cash will likely stay there unless a crisis of epic proportions sparks capital flight, analyst say.
"The money has been sitting there so long, it's difficult to pin down what will prompt people to spend the cash," Mizuho Securities' chief market economist Yasunori Ueno told CNBC by phone.
The notion came to public attention last year when Finance Minister Taro Aso scolded the Japanese for sitting on 880 trillion yen ($7.33 trillion) in cash, which was widely reported by the local press as being 'kept under mattresses'.
"It's ridiculous – the money should be deposited at financial institutions so the banks can fund promising industries," said Aso, according to a Sankei newspaper report.
But that figure was based on household cash deposits at Japanese banks, rather than hidden under mattresses, Ueno said. As per his calculations in a note dated March 25, households are probably hoarding around 36 trillion yen ($301 billion) of cash.
"It's like an iceberg – it just won't melt," said Dai-ichi Life Research Institute (DLRI) chief economist Hideo Kumano. "It will just sit there, immobile and frozen in time."
Cash is king
In many countries hoarding cash at home is synonymous with the underground economy, but the reasons in Japan are more mundane.
"Under deflation, cash is king," said DLRI's Kumano, although he added that an unknown portion of the cash is probably just being hidden from the taxman.
At any rate, putting cash in the bank doesn't mean it will earn any interest.
Deposit accounts do not pay any interest in Japan. Even a ten-year savings account will only pay interest of between 0.10 percent and 0.150 percent, or one dollar on every 10,000 dollars in the bank, according to Mizuho Bank's website.
"Why bother going to the bank to deposit your money when it earns no interest? You may as well save yourself the effort of taking the trip down to the bank," said Kumano.
Crisis of epic proportions
The first wave of hoarding came in the aftermath of the asset bubble crash in the early 1990s and the Bank of Japan's partial removal of bank deposit guarantees, according to Mizuho's Ueno. He estimates 24.5 trillion yen of cash slipped under the official economy's radar between 1993 and 2003.
And only another economic crisis of epic proportions is likely to push households to stop hoarding their cash, analysts said.
One possibility would be hyperinflation and capital flight that triggers a rapid weakening of the yen, according to DLRI's Kumano.
"If the yen weakened every year by 20 yen against the U.S. dollar – say to 200 yen -- people would be worried about holding yen, and they would have to go through the banks to transfer money abroad," he said.
The yen was trading at 120.30 yen to the dollar in mid-day Asia trading on Tuesday.
The simplest and most obvious way to lure out the cash would be to raise interest rates, which are hovering at record lows, but that has its own pitfalls.
"The government wouldn't be able to afford to service its debt anymore," said Kumano.
At almost 232.5 percent of gross domestic product (GDP) in 2015, according to Organization for Economic Corporation and Development (OECD) data, Japan has one of the highest debt ratios in the world. By contrast, Greece's GDP to debt ratio is 188 percent.