Middle-aged Men Fuel $67 Trillion Japan Foreign Exchange Trading Surge

In Tokyo, it is a familiar sight to see salarymen engrossed in their phones while commuting on the subway. However, not all of them are playing Pokémon Go; a significant number are actually using trading apps to actively engage in buying and selling the yen, aiming to make profits from quick fluctuations in its value.

Retail currency traders are having a field day as speculation mounts that the Bank of Japan is moving closer to raising its key interest rates, with some betting on a move as soon as next week. The predominantly middle-aged male cohort adds to the volatility of the fast forex market by seizing intraday moves, a departure from the previous focus on interest rate spreads.

“I’m really convinced that in the current market, short-term trades have become very profitable,” said Satoshi Hirai, 43, who trades along with running a video studio in Gifu Prefecture, central Japan. Hirai has been buying and selling yen about 100 times a day lately, using the money he earns to buy a Leica camera and guitars to play in his punk rock band.

The increased participation of mom-and-pop traders reflects Japan’s new monetary policy paradigm. The country is the last holder of negative interest rates globally, despite inflation that has remained high, prompting investors to bet that the BOJ may change policy sooner rather than later.

Advertisements for currency trading apps have popped up in Tokyo subway stations, cartoon characters like sheep and pigs are all over social media to promote currency trading, and a bar dedicated to the retail trade in the prestigious Ginza shopping district is attracting customers who exchange change. drinking tips.

According to the BOJ’s analysis of developments in 2022, these investors have become an important driver of volatility.

“We have been paying attention to the trends of individual foreign exchange investors for some time, but found it important even now because transaction volumes increased significantly,” said Hidemi Bessho, deputy director of the foreign exchange unit of the BOJ’s financial markets department. and one of the authors of the report.

According to a BOJ report, retail investor volume in Japan will reach a record high of ¥10 quadrillion ($67 trillion) in 2022, 28% of such trading globally. The retail trade is already worth nearly ¥9 quadrillion in the nine months to September, according to data from Japan’s Financial Futures Association.

One retail investor, Kazuya Inui, started doing mostly short-term trades about a year or two ago after the yen weakened. “The time from income to profit can be as short as one second or even one day,” said Inui, 47, who is based on Shikoku, the smallest and least populated of Japan’s four main islands.

“There are some good openings when volatility is high, so I make sure I’m ready to trade at any time,” Inui said.

The yen has fallen more than 12% this year as Japan’s widening yield gap with the U.S. favors the dollar, and earlier weakened above $150 to a new low for the year. The volatility, fueled by speculation that Governor Kazuo Ueda is moving toward a policy change, offers big opportunities for retailers.

“They can go in after the spot move if volatility increases on news like the BOJ,” said Ryo Suzuki, chief executive of SBI Liquidity Market Co., whose subsidiary has a trading app. “It seems to me that it’s going well for traders who sell and buy repeatedly.”

Takuya Kanda, chief executive of foreign exchange brokerage Gaitame.com Research Institute Ltd, said short-term traders are overwhelmingly middle-aged salary earners using apps. They are, according to Kanda, “pretty aggressive in their professions” and a different breed than the over-60s who mostly work on personal computers.

At the other end of the spectrum, younger Japanese also appear wary of short-term trading, opting instead for currency savings products that require regular contributions over time, he said.

Katsuyoshi Suzuki, 36, CEO of Cyber Impact, a small marketing and social media management company, has four apps on his phone for part-time trading and makes up to 10 transactions a day. “I trade when I travel, when I get home from work and even when I’m hanging out with friends,” Tokyo-based Suzuki said.

Of course, there are risks involved in buying and selling foreign exchange, and most Japanese households are still shy about investing. At the end of March, households had 54 percent of cash and deposits, while it was about 13 percent in the United States and 36 percent in the euro area, according to the BOJ’s August report.

“There’s a lot of nervousness,” said Suzuki. “For example, if I’m buying dollar-yen, I always look at what other people are doing and what information is out there to see if my thoughts are correct, which calms my nerves.”

The Japanese have been known to be relatively risk-prone in other areas as well. When the GameStop meme stock plagued the US in 2021, Japanese retail investors held back, unwilling to go for something that wasn’t their routine, safe option.

Still, the SBI said that with the yen trading at the key 150 level against the dollar, short-term traders have a good chance of profiting, especially if Japan intervenes to support its weakening currency, as it did last year.

Hirai, a trader in central Japan, said that while his biggest daily loss was about ¥1.3 million, he has also made up to ¥9 million in 24 hours. He credits his success to making quick trades and increasing his understanding of the market through online courses and books. Hirai has invested ¥25 million in a local school to improve financial literacy and is committed to teaching his six-year-old daughter about currency trading.

Cyber Impact’s Suzuki is similarly perky. He is a regular at the Stock Pickers bar in central Tokyo, where drinkers can choose from a menu that includes the Lehman Shock cocktail.

“Right now, my goal is to make a billion yen just from the trade,” Suzuki said. “I don’t want to stop until I die.”