(Bloomberg) — Office workers scrolling on their phones on the subway are a common sight in Tokyo, but not all of them are playing Pokemon Go, many are using trading apps and are short-term They actively buy and sell the yen in order to profit from the fluctuations.
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Retail currency traders are in a frenzy as speculation mounts that the Bank of Japan is close to raising the minimum interest rate, with some saying it could do so as early as next week. The group, made up mainly of middle-aged men, is moving away from its traditional focus on interest rate differentials and instead taking advantage of intraday movements, amplifying the volatility of fast-paced foreign exchange markets.
“I believe that short-term trading has become very profitable in the current market,” said Satoshi Hirai, 43, who runs a video studio and trades in Gifu Prefecture, central Japan. Hirai recently bought and sold yen about 100 times a day, and used the money he earned to buy a Leica camera and a guitar to play in a punk rock band.
The increased involvement of mother-son traders reflects the new monetary policy paradigm facing Japan. Despite inflation remaining high, the country is one of the last in the world to keep negative interest rates, leading investors to bet that the Bank of Japan will adjust its policy sooner rather than later. It’s layered.
Advertisements for foreign exchange trading apps have popped up around Tokyo subway stations, cartoon characters such as sheep and pigs promote currency transactions on social media, and bars dedicated to retail transactions in Ginza’s upscale shopping area feature currency exchange. There are many regular customers who do this. Tips while having a drink.
According to the Bank of Japan’s analysis of trends in 2022, these investors are a key driver of volume during times of volatility. Automated trading tools, social networking sites and influencers are fueling the trend, a report last month showed.
Hidemi Bessho, assistant director of the Foreign Exchange Division of the Bank of Japan’s Financial Markets Department, says, “We have been paying attention to the trends of individual foreign exchange investors for some time, but now that the trading volume has increased significantly, we think it is important.” And she is one of the authors of the report.
According to a report by the Bank of Japan, the value of trades by individual investors in Japan reached a record high of 10 quintillion yen ($67 trillion) in 2022, accounting for 28% of the value of trades by individual investors worldwide. According to data from the Japan Financial Futures Association, retail trading volume has already reached nearly 900 billion yen in the nine months to September.
Kazuya Inui, an individual investor, started mainly short-term trading about one to two years ago when the yen depreciated. “The time from entry to profit is as short as one second and as long as one day,” says the 47-year-old, who is based in Shikoku, the smallest and least populated of Japan’s four main islands. Mr. Inui said.
“When volatility is high, there are some good triggers, so be prepared to trade at any time,” Inui said.
The yen has fallen more than 12% this year and recently hit a new yearly low of more than $150 against the dollar, as the widening yield gap between Japan and the U.S. favors the dollar. The volatility, fueled by speculation that Gov. Kazuo Ueda is moving toward policy changes, is opening up big opportunities for retail traders.
Read: Bank of Japan expected to keep YCC, negative interest rates unchanged next week
Ryo Suzuki, executive director of SBI Liquidity Market, whose subsidiary operates a trading app, said, “If volatility increases due to news such as the Bank of Japan, we may enter the market after the spot moves.” “It seems to be working out well for traders who buy and sell.”
Takuya Kanda, general manager of foreign exchange brokerage firm Gaitame.com Research Institute, says the overwhelming majority of short-term traders are middle-aged office workers who use apps. According to Kanda, they are a different breed than people over 60, who are “very proactive about their work” and primarily work on computers.
However, Japan’s younger generation also appears to be wary of short-term trading, opting instead for exchange savings products that require regular contributions over a long period of 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 as many as 10 trades a day. . “I trade while traveling, coming home from work, and even when I’m playing with friends,” said Suzuki, who is based in Tokyo.
Of course, buying and selling FX involves risks, and most Japanese households remain reluctant to invest in general. According to the Bank of Japan’s August report, the percentage of households holding foreign currency and deposits at the end of March was 54%, compared to about 13% in the United States and 36% in the euro area.
“I’m really nervous,” Suzuki said. “For example, when I buy the dollar yen, I always check what other people are doing and what information is out there to judge whether my idea is correct. That relieves some of the tension.”
Japanese people are known to be relatively risk-averse in other areas as well. When the GameStop meme stock scandal hit the U.S. in 2021, Japanese retail investors stood back and stayed away from anything that wasn’t a routine, safe option.
Still, with the yen trading around the key 150 yen level against the dollar, SBI could potentially benefit short-term traders, especially if Japan intervenes to support the currency’s weakness, as it did last year. said there is enough.
Mr. Hirai, a trader in central Japan, said his biggest daily loss was about 1.3 million yen, but he once made a profit of 9 million yen in 24 hours. He attributes his success to fast trading and a deeper understanding of the market through his online courses and his books. Mr. Hirai has invested 25 million yen in a local school to improve financial literacy and is committed to teaching his 6-year-old daughter about Forex trading.
Mr. Suzuki of Cyber Impact is similarly upbeat. He’s a regular at Stock Pickers Bar in central Tokyo, where you can choose from a menu featuring the “Lehman Shock” cocktail.
Suzuki said, “My current goal is to earn 1 billion yen just from trading.” “I don’t want to stop until I die.”
–With assistance from Daisuke Sakai and Shoko Oda.
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