Japan FX trading volumes down as Mrs. Watanabe turn to stocks

Volumes will only pick up when we see volatility in the Japanese Yen return

The well-known personality of Mrs. Watanabe as the housewife who sits at home and trades the forex market might be turning to other assets to realize gains following the reduction in volatility of JPY pairs.

Japanese forex brokerages had reported earlier this year huge volume spikes after the drastic change in domestic monetary and fiscal policies under then-new Japanese Prime Minister Shinzo Abe. Leading Japanese retail FX broker GMO Click reported record volumes exceeding $1 trillion monthly for several consecutive months.

But things started to change after the summer. Volatility in the Yen waned, and with it trading volumes. GMO Click and Monex Group volumes stuttered in the month of October to 2013 year lows.

So where did the retail forex traders go?

A recent article by Bloomberg titled Japan Online Stock Trades at Record Amid Surging Volume might hold the key to that coffer. As the article reports, stock brokerages around “The Land of the Rising Sun” are seeing the sun rising for themselves for the first time in more than two decades with volumes on the Japanese Stock Exchange surging to record levels.

Following the election of Mr. Abe as Prime Minister in December and his pledge for easy fiscal policy as the term “Abenomics” was born, volatility on the domestic forex market has drastically increased. As later became apparent, monetary policy was the second pillar of the new Prime Minister’s plan and the Yen has experienced sharp depreciation up until May.

The summer months have brought calm to the Japanese Yen pairs and consequently the appetite of retail forex traders has subsided. However according to the article, trading still remains a very popular activity in Japan – stocks have continued to be volatile with the Japanese indices being the strongest performers this year rising more than 37% since Abe became prime minister in December 2012.

The traders’ capital flocked to the stock market and the biggest brokerage in Japan, Nomura has reported that earnings in their retail brokerage business have increased more than fivefold. As it normally occurs, traders are seeing volatility as profit opportunity and until a resumption of worries about the Japanese Yen’s value resurface, we are not likely to see monthly volume metrics return to levels observed earlier this year.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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