Middle-aged salarymen amp up forex trades to exploit volatile yen

TOKYO: Salarymen scrolling through their phones on the subway are a common sight here, but they aren’t all playing Pokemon Go – many are on trading apps, aggressively buying and selling the yen to profit from short-term swings.

Retail currency traders are having a field day as speculation mounts that the Bank of Japan (BoJ) is getting closer to raising its rock-bottom interest rates, with some betting on a move as soon as next week.

The cohort of mainly middle-aged men is amplifying volatility in the fast-paced currency markets by seizing on intraday moves in a departure from their previous focus on interest rate differentials.

“I’m really convinced that in the current market, short-term trades have become super-profitable,” said Satoshi Hirai, 43, who trades alongside running a video studio in Gifu Prefecture in central Japan.

He has been buying and selling the yen about 100 times a day recently, and used the money he made to buy a Leica camera and guitars to play in his punk rock band.

The increased involvement of mom-and-pop traders reflects the new monetary policy paradigm that Japan is facing.

The country is the last hold-out for negative rates globally, despite inflation that’s remained elevated, spurring investors to pile on bets that the BoJ may adjust policy sooner rather than later.

Ads for foreign-exchange (forex) trading apps have popped up around Tokyo subway stations, cartoon characters including sheep and pigs are all over social media to promote currency trading, and a bar dedicated to retail trading in the upscale shopping area of Ginza is drawing patrons who swap tips over drinks.

These investors have become an important driver of volume at times of volatility, according to a BoJ analysis of developments in 2022.

Automatic trading tools, social networking sites and influencers have super-charged the craze, the report last month indicated.

“We have been paying attention to the trend of individual forex investors for some time, but also thought it was important now because the transaction volume increased significantly,” said Hidemi Bessho, deputy head of the forex division in the BoJ’s financial markets department, and one of the authors of the report.

Volume by retail investors in Japan hit a record high of 10 quadrillion yen in 2022, 28% of such trading globally, according to the BoJ report.

Retail trading is already at nearly nine quadrillion yen for the nine months to September, data from the Financial Futures Association of Japan show.

One retail investor, Kazuya Inui, started doing mostly short-term trades about a year or two ago after the yen weakened.

“The time from entry to profit can be as short as one second or as long as one day,” said Inui, 47, who’s based in 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 am ready to trade at any given moment,” said Inui.

The yen has slumped more than 12% this year as Japan’s widening yield differential with the United States favoured the dollar, and earlier weakened past 150 against the greenback to a fresh low for the year. The fluctuations fuelled by speculation that governor Kazuo Ueda is inching toward a policy change are carving out great opportunities for retail traders.

“They can go in after the spot moves if volatility increases on news like the BoJ,” said Ryo Suzuki, executive managing director at SBI Liquidity Market Co, whose subsidiary runs a trading app.

“It seems to me that it’s going well for traders who are repeatedly selling and buying.”

Takuya Kanda, general manager at currency brokerage Gaitame.com Research Institute Ltd, said the short-term traders are overwhelmingly middle-aged salarymen using apps.

They are “quite aggressive with their trades” and a different breed to those over the age of 60, who mostly work on personal computers, according to Kanda.

At the other end of the spectrum, younger Japanese also seem to be cautious about short-term trading, opting instead for forex saving products that require regular contributions over time, he said. — Bloomberg