Recent Trends in Japanese Foreign-Exchange Margin Trading

Tai Terada, Naoto Higashio and Jun Iwasaki
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Tai Terada: Bank of Japan
Naoto Higashio: Bank of Japan
Jun Iwasaki: Bank of Japan

No 08-E-3, Bank of Japan Review Series from Bank of Japan

Abstract: Foreign-exchange margin trading by individual investors has become common in Japan during the last several years. This paper uses available data to review recent trends in Japanese foreign-exchange margin trading. It finds that turmoil in international financial markets, triggered by the "subprime debacle" since August 2007, resulted in a decline in outstanding positions for foreign-exchange margin trading. There was nonetheless a steady increase in account numbers and trading volumes. Since August 2007, trading approaches and currency selection have also changed. For example, leverage has declined, dollar/yen turnover ratios have increased, and there have been shifts to high-yield currencies.

Date: 2008-09
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