FX = foreign exchange margin trading where individual investors buy and sell foreign currencies.

According to the Financial Futures Association, the total annual transaction amount from January to November exceeded 1 kyo yen for the first time.

It's hard to imagine that 10000000 yen is 10000000000000000 yen, and 1 is followed by 16 zeros.

Then, how much money is 10000000000000000000000000000000000000000000000000000000000000000000000000000000000?

Forex trading was booming this year.

As the environment changes dramatically, such as the Bank of Japan revising monetary easing on December 20, we will look at what will happen to FX trading next year.

(Economics Department reporter Kei Nakazawa)

Points of this article

・This year, the amount of FX transactions by individuals surpassed 1 quintillion yen for the first time, with dollar-yen transactions particularly active.



・The reason for this is that while Japan maintains monetary easing, the United States is tightening

monetary


policy.



Levitate.


[The direction of next year is difficult to predict, and there is also a view that FX will be sluggish]

What is the reason for expanding to the 1-quintillion-yen market?

The total value of over-the-counter FX transactions from January to November this year was 1083 trillion yen.



Compared to last year's total of 5,998 trillion yen, this is a 1.8-fold increase.

Of these, dollar-yen transactions accounted for 8,223 trillion yen, or 74% of the total.



A sharp depreciation of the yen is what has brought the market to life.



One of the factors is the difference in direction of monetary policy between Japan and the United States.



In March this year, in order to suppress record inflation, the United States lifted the zero interest rate policy, which had been in place for two years due to the corona crisis, and raised interest rates.



Even after that, the United States continued to raise interest rates with the stance of "prioritizing the suppression of inflation even if it means temporarily sacrificing the economy."



On the other hand, the Bank of Japan did not change its stance of maintaining large-scale monetary easing, and as a result of this contrasting monetary policy, the interest rate differential between Japan and the United States widened, which accelerated the yen's depreciation.



As long as the Bank of Japan did not move, individual investors and others decided that this pattern would not change for the time being, and strengthened their yen-selling/dollar-buying movements.



In October, when the yen depreciated to the 150 yen level to the dollar, the government and the Bank of Japan intervened in the market for the first time in 24 years by selling the dollar and buying the yen.



However, individual investors who saw that the trend of yen depreciation would not change even after the intervention actively sold the yen and bought the dollar.



Looking at the trend of FX trading this year, the transaction amount in September was 1398 trillion yen (up 200% compared to the same period last year), which was the largest single month since November 2008 when statistics began to be collected.



The transaction value in October was 1,088 trillion yen (up 88% year-on-year).



Furthermore, even in November, when the yen exchange rate reversed and moved in the direction of yen appreciation, trading continued to be brisk at 1,297 trillion yen (up 120% year-on-year).



What kind of people were participating in the transaction during this time?



According to GMO Click Securities, a major FX trading company, as of the end of June, people in their 40s accounted for 30% of the people who had a dedicated FX trading account for this company as of the end of June.



In addition, 28.6% are in their 30s and 10% are in their 20s, indicating that relatively young people are also participating.



Japanese FX trading participants who move huge amounts of money are known overseas as “Mrs. Watanabe” and are recognized as players with a strong presence that influences the market.



"Mrs. Watanabe" attracted attention overseas even during the yen depreciation around 2007, but its existence has attracted attention again this year.

Will it continue to be active next year?

However, most market participants believe that this unprecedented boom will not continue next year.



The reason for this is that the monetary policy stances of Japan and the United States, which created the weak yen, have begun to change.



The US Fed = Federal Reserve Board decided to reduce interest rate hikes at a meeting held until December 14th.

This seems to be due to the fact that the record inflation is showing signs of calming down and that a rapid interest rate hike will have a negative impact on the economy.



On the other hand, on December 20th, the Bank of Japan's monetary policy meeting was held.

Most market participants, including myself, thought that the current large-scale monetary easing measures would be maintained, but the Bank raised the upper limit of the fluctuation range of long-term interest rates.



Bank of Japan Governor Kuroda emphasized that this revision was neither an interest rate hike nor a tightening, but the market took it as a de facto interest rate hike, and the yen appreciated against the dollar at once.



Regarding this, Takuya Kanda, General Manager of the Research Department of Gaitame.com Research Institute, who is familiar with FX trading, speaks as follows.

“Compared to when there were a lot of transactions this year, the transaction value in December has fallen to less than half at most. At this time, there was not much movement to buy the depreciated dollar, as was the case when the government and the Bank of Japan intervened in the market in October, and the enthusiasm that was once there is gone. In the midst of this, it is becoming difficult to understand the direction of investment, and it is becoming difficult to invest aggressively



. Forex trading boomed this year.



It was also a year when the presence of “Mrs. Watanabe” increased remarkably.



With the stances of the central banks of Japan and the United States changing, will they be cautious about trading next year, or will they seize the opportunity to turn aggressive and strengthen their presence again?



I would like to pay attention to the movement of "Mrs. Watanabe" along with the movement of the yen exchange rate.

Next week's plan

In the next week, we will have a series of announcements of indicators showing trends in the housing market in the United States.



Since the purchase of a home also leads to the purchase of furniture, home appliances, cars, etc., it is also attracting attention in terms of forecasting the future of consumption.



However, it is pointed out that the housing market is beginning to cool down as housing loan interest rates continue to remain high due to interest rate hikes by the Federal Reserve Board in the United States.



Next week, the Tokyo Stock Exchange will hold a big deal to conclude the trading year.



The market was turbulent due to the new corona and the situation in Ukraine.



The year of the rabbit next year is said to be "bouncing" in the market proverb, but will it be a year of leaping as the proverb says?