JPY 01 (May 08 - Oct 11)

[kennynah]

open up a 10 year monthly chart and you will discover that the USD/JPY 102 support was broken convincingly around Oct08...



on a daily chart, i see a penant formation (ie a triangle with price coiling tighter and tighter to the right apex) since late Oct 08. penants as we know, is a continuation formation...ie, there's a likelihood that the price will continue to slide down when and if it breaks out of the penant...



actually...this means the USD is weakening (not strengthening) against JPY , as you now need progressively lesser Yen to change for 1 USD....ie JPY is strengthening against USD...

as for USD/SGD.... i see a support at 1.46, and before that, 1.49 support....against the greenback

[iam802]

You are correct on the major trend (and all the higher timeframe).

I was looking at the 15min chart earlier amd saw USD/JPY hit 97 (up from 93) a couple of days back.

It went down and is now hovering around 95 (somewhere in the kumo)

[millionairemind]

They are trying to"talk down the Yen" again..

Yen Declines as Nakagawa Says Japan May Take Currency Action
By Stanley White

Dec. 18 (Bloomberg) -- The yen fell from near a 13-year high against the dollar after Japanese Finance Minister Shoichi Nakagawa signaled the nation is ready to sell the currency.

The yen also declined against the euro after Nakagawa told reporters that “we will take necessary steps if needed” to limit the currency’s advance and protect the overseas earnings of Japanese exporters. The dollar fell to an 11-week low against the euro on speculation the Federal Reserve’s near-zero interest rate policy will reduce the appeal of U.S. assets.

“We are at such low levels now that yen intervention becomes a possibility, and that’s making some people nervous,” said Saburo Matsumoto, senior manager of foreign-exchange sales at Sumitomo Trust & Banking Co. in Tokyo.

Japan’s currency fell to 87.77 per dollar as of 11:31 a.m. in Tokyo from 87.24 yen yesterday in New York, when it reached 87.14, the highest level since July 1995. It declined to 126.41 per euro from 125.80 yesterday. The dollar was at $1.4418 per euro from $1.4419 after reaching an 11-week low of $1.4456. The yen may decline to 88 per dollar today, Matsumoto said.

[mocca_com]

Yen Falls as Carmaker Loans Revive Confidence in Carry Trades By Ron Harui and Stanley White

Dec. 22 (Bloomberg) -- The yen fell against the euro, extending this month’s loss, as U.S. government aid to General Motors Corp. and Chrysler LLC gave investors confidence to boost holdings of higher-yielding assets funded in Japan.

The Japanese currency also dropped versus the dollar after Bank of Japan Governor Masaaki Shirakawa expressed concern over the yen’s gains following a record plunge in exports in November. The dollar weakened against the euro before data this week that may show U.S. consumer spending, home sales and durable goods orders declined.

“GM and Chrysler have won a reprieve for the remainder of this year,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This is pushing the yen a little bit lower.”

The yen dropped 1.3 percent to 125.82 per euro at 2:40 p.m. in Tokyo from 124.22 on Dec. 19, paring its gain this year to 29 percent. The currency declined to 89.79 against the dollar from 89.31 late last week. It reached 90.23, the lowest level since Dec. 16. The dollar weakened to $1.4025 per euro from $1.3912. It slid to an 11-week low of $1.4719 on Dec. 18.

Against the yen, Singapore’s dollar climbed 0.8 percent to 61.82 and Taiwan’s dollar advanced 0.2 percent to 2.752 from late in New York on Dec. 19. Japan’s Nikkei 225 Stock Average gained 1.2 percent on optimism the $13.4 billion in emergency government loans to GM and Chrysler will limit the fallout of a global recession.

Interest Rates

Investors added to so-called carry trades, in which they get funds in a country with low borrowing costs and buy assets in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits. Japan’s benchmark interest rate is 0.1 percent, compared with 2.5 percent in the 15-nation euro region, 4.25 percent in Australia and 5 percent in New Zealand.

The yen has appreciated 24 percent against the dollar this year, the most since 1987, as more than $1 trillion of credit- market losses sparked a seizure in money markets and threw the world’s largest economy into a recession.

A Japanese government report today showed exports fell 26.7 percent in November from a year earlier, the most since comparable data were made available in 1980, as the yen surged to a 13-year high against the dollar.

Honda Motor Co., Japan’s second-biggest automaker, said last week that it may shift manufacturing overseas if the currency strengthens further.

U.S. Economic Reports

The dollar snapped two days of gains against the euro before U.S. reports that economists estimate will show the world’s largest economy is slipping further into recession.

Consumer spending fell 0.7 percent in November and orders for durable goods may show a second straight decline, according to Bloomberg News surveys of economists. The Commerce Department releases both reports on Dec. 24. Combined sales of new and existing homes approached the lowest level in at least nine years, data may show tomorrow.

“The bias is for the dollar to go lower,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “U.S. economic data are likely to confirm just how bad the outlook is.”

The U.S. currency has gained 4.1 percent against the euro this year, 33 percent versus the British pound and 28 percent against the Australian dollar as investors bought the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit.

The yen declined against 15 of the 16 most-active currencies as BOJ Governor Shirakawa told Keidanren, Japan’s largest business lobby, the yen’s strength is likely spur a drop in exports and the central bank is making the utmost efforts during the current credit-market crisis.

‘Temporary Halt’

Japan’s central bank last week cut its benchmark rate to 0.1 percent from 0.3 percent, increased purchases of government debt and announced plans to buy commercial paper for the first time to counter the recession. Japanese Finance Minister Shoichi Nakagawa last week signaled the nation is ready to intervene in the foreign-exchange market for the first time in four years.

“The BOJ moves could put a temporary halt to the accelerating pace of yen appreciation, which has prompted increasing rhetoric from the MOF,” said Stephen Halmarick, co- head of economic and market analysis at Citigroup Inc. in Sydney. “However, this will likely prove no more than a temporary reprieve.”

The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 41,381 on Dec. 16, compared with 43,259 a week earlier.

The last time Japan intervened on its own, it sold a record 20.4 trillion yen ($226 billion) in 2003 and 14.8 trillion yen in the first quarter of 2004, when the yen rose as high as 103.42 per dollar. Japan hasn’t bought yen since 1998, when it spent 3.05 trillion yen as the currency reached as low as 147.66.

Source: Bloomberg

[winston]

Japan Is About to Devalue Its Currency: Here's How to Profit By Tom Dyson

Before you read today's investment idea, look at the chart below. It's Toyota's worst nightmare.

In the last five months, the yen has moved from 110 to 90 against the dollar, making it 2008's strongest currency. The yen is the highest it's been in 14 years... and it's only a few points away from its highest level ever.

Toyota sells cars all over the world. When the yen rises against other currencies, Toyota's cars are more expensive to foreigners. They don't buy so many. They choose American, European, or Korean cars instead. Toyota loses money.

According to the Wall Street Journal, every point the yen rises against the dollar costs Toyota $433 million in annual operating profit. In other words, over the last five months, Toyota saw $8.6 billion in annual profits disappear... That's about a quarter of its annual operating profit.

This chart shows the Yen Trust. When this fund rises, it means the yen is getting stronger.

Japan's entire economy is a large version of Toyota. Japan is an export economy. Its strategy for prosperity is producing goods and selling them to foreigners. Every point the yen rises costs Japan billions of dollars in profits for its companies, billions of dollars in tax revenues for the government, and thousands of jobs in the economy.

In the past, when the yen rose too high, Japanese authorities intervened in the markets to make the yen fall. One tool they use is cutting interest rates. Low interest rates discourage people from storing their money in yen and encourage them to save their money in other currencies with higher interest rates.

Right now, the Japanese yen has the world's second-lowest official interest rate, after the U.S. The official central bank rate in Japan is 0.3%.

The second tool Japanese officials use to devalue their currency is direct intervention in the foreign exchange markets. The Bank of Japan prints money and then exchanges the yen for dollars in the foreign exchange market, pushing down its price.

The last time the Japanese got worried about the yen being too high was in 2003 and 2004. The yen was around 105 at the time. They spent $2.5 billion pushing their currency down about 20% against the dollar.

The Japanese yen is now around 15% higher than it was in 2003-04. And Japan's economy is much sicker than it was back then. The stock market is close to 20-year lows and GDP is shrinking. There's no room to keep cutting interest rates. I'm certain the Japanese authorities are going to start intervention again soon. It may be happening already. Last week, the head of Japan's central bank told the press he was looking at ways to devalue the yen.

Japan's currency pays no interest. Japan's economy is in tatters. But debt is the big reason I expect the yen to fall. Japan's government is the most indebted in the world... with a government debt-to-GDP ratio expected to hit 150% next year. (It averages between 70% and 75% for the six largest economies in the world.)

To devalue its currency, Japan's going to have to print money using the same "quantitative easing" techniques Bernanke is using right now. These techniques are highly inflationary... and guarantee the yen will fall against other currencies.

You won't hear any other writer in the world predicting inflation and currency devaluation in Japan right now. That's why it's such a good bet. Plus, as you can see from the chart above, we've got the trend in our favor.

FXY is the symbol of the Japanese Yen Trust. When the yen falls against the dollar, this fund falls. The easiest way to bet on a fall in yen is to short this fund or buy put options on it.

Source: Daily Wealth

[winston]

Will the Yen Lose its “Safe Haven” Status as Japan’s Economy Deteriorates? By Keith Fitz-Gerald

Historically speaking, the Japanese yen has proved to be a safe haven against global turmoil. Right now, however, Japan’s economy is among the worst hit of all the global powers. It is ill prepared to weather the global storm and it’s falling like a rock.

That’s why, this time around, as Japan’s economy falls away, I think there’s a very good chance the yen could drop as well.

Obviously, this would be very bad news for the huge numbers of speculators and institutions that have literally bet their existence on yen-based hedging strategies. But while a freefall in the yen would be a surprise to those institutional players, it would be about par for the course in my book, given the current state of the ongoing global financial crisis.

As reported, hedge funds have so far unwound gold, real estate, easy-to-sell stocks and other asset classes - so why shouldn’t they unwind currencies at some point, too? The same can be said for banks and other financial institutions currently embroiled in the global financial fiasco. With redemptions mounting, continued malfeasance like the $8 billion Stanford Financial scandal coming to light, and the credit markets still essentially locked-up tight, it’s not an unreasonable expectation.

Traditionally, analysts have looked to current-account balance statistics as a guidepost of sorts when the going gets tough. Specifically, analysts like to study surpluses on net foreign assets because those figures have historically indicated which currencies are expected to perform better during times of crisis.

The theory is that the higher the surplus, the more incentive a nation (and the companies in it) have to “repatriate” assets - that is, to bring them home. Therefore, traders tend to go “long” on the strongest, while simultaneously abandoning the weakest - or even shorting them outright.

And they have in record numbers. According to the Bank of Japan (BOJ), the yen remains near the highest nominal trade-weighted level it’s posted since November 2001. And while you’d think there would be some reduction in this “safety first” view of the yen - especially given recent U.S. announcements regarding the stimulus package - the fact is that there really haven’t been any serious reductions in the net-long yen position.

Indeed, the latest data from DanskeBank A/S shows that, in recent weeks, speculative investors have only reduced net long Japanese yen positions to some $6 billion dollars. It also reflects that traders tracked by the U.S. Commodity Futures Trading Commission (CFTC) remain net short all other major currency pairs which directly contradicts what Washington thinks and is telling the public about a recovery.

In fact, data drawn from the CFTC suggests that not only is the yen still viewed as a safe-haven currency, but that traders don’t buy into a U.S. recovery. In fact, traders are actively betting against a global recovery, at least as far as the major currency trading pairs are concerned.

There’s no similar data available from China, since its currency is partially blocked at the moment, but I’m hearing from traders all over the world that they’re assembling large-scale positions in China’s renminbi (yuan). If that’s true, this development will support my long-held contention that China is the real key to solving this mess, and my belief that China’s currency is poised to become every bit as viable as the dollar or the yen - if not more so, given the current global financial crisis.

The problem is that money is still flowing out of Japan and into foreign equities and bonds when it should still be flowing in. Consequently, some people like the institutional traders and speculators who have assembled the more than $6 billion in long positions in the Japanese yen argue that this is a temporary happenstance and one that, in fact, creates an even greater incentive to eventually repatriate the assets.

But I’m not so sure.

For one thing, the fact that “everybody” expects a stronger yen is the sort of contra-indicator that raises the hair on the back of my neck. Anytime the markets have such unified, blanket expectations, the unthinkable becomes possible, particularly if what everybody believes appears in print.

To illustrate what I mean, allow me to turn to the vaunted “magazine cover-story indicator,” which actually has a statistical basis as a contrarian warning.

Two of my favorite examples include the 1999 Economist cover story, “Drowning in Oil,” which stated that crude oil would fall to between $5 and $10 a barrel, and remain there for the next decade, and the infamous 1979 Business Week cover story, “The Death of Equities.” Less than a year later after the former was published, oil was trading at more than $25 a barrel. As for the latter, it preceded one of the greatest bull market run-ups in history.

Then there’s the fact that the Japanese economy is suffering its worst economic contraction in 35 years, and a recession that may be the worst in 50 years. According to Japan’s Ministry of Finance, the country’s industrial production is tanking to the tune of 30% this year, while its gross domestic product (GDP) may plummet 12% in a mere 12 months.

While this is unfolding, exports plunged thanks to non-existent overseas demand for the cars and electronics that have long been the mainstay of Japan’s industrial might. Overall, shipments to the United States - long Japan’s trading partner of choice - have plunged a staggering 34%.

The Wall Street Journal recently reported that Japan is running its first trade deficits in a generation - five months in a row at last count. This is especially problematic because Japan and China - together with South Korea - are the world’s largest purchasers of U.S. debt.

So at a time when the United States is trying to save its financial system and jump-start its economy by pumping trillions of dollars into the world financial system - and desperately needs global buyers to buy this new debt so that it can forge ahead with its rescue plans - Japan may not have the financial wherewithal to help make this happen. And China and South Korea may simply elect not to buy any more.

By all accounts, the fallout of all this turmoil is staggering. Japan’s economy may contract by 4.6% in 2009, Kyohei Morita, chief economist for Barclay’s Capital (ADR: BCS), told BusinessWeek recently.

Toyota Motor Corp. (ADR: TM) is projecting a worsening situation and a string of mounting losses that will be the first since 1938. Every single digit of yen appreciation is projected to cost the company an additional $450 million in operating losses.

According to The Tokyo Shinbun, more than 30% of Japan’s prefectures (governmental bodies larger than cities, towns, and villages) have already implemented emergency economic measures of their own. Overall, unemployment rose to 4.4% in December, the worst such figure recorded in 42 years. Tent cities are growing and many public parks are now overflowing with homeless people - something I recall seeing during the depths of Japan’s last “Lost Decade.”

My friends tell me that factories in the normally highly industrialized Osaka area have shifted to 15-day-a-month production schedules, and many salarymen (Japan’s iconic office superheroes) are being encouraged to seek “arubaito” - or part-time work - to make ends meet. And those are the people who are still fortunate to have jobs. My mother-in-law tells me that it’s becoming increasingly common to see these workers serving noodles or working in department stores, doing jobs that have historically been done by college kids.

Things are so bad that Prime Minister Taro Aso has an unprecedented approval rating of less than 10% and many normally respectful Japanese, including my ultra-reserved father-in-law, refer to him as an “uneducated blockhead.”

I could go on, but I think you get the picture. It’s bleak and getting worse by the day in a nation that I have lived in during much of the last 20 years and come to love.

That’s why shorting the yen may wind up being one of the most fundamentally successful - and admittedly contrarian - investment choices we can make in today’s mad markets.

Source: Money Morning

[winston]

Are You Ready for the World's Biggest Bankruptcy? By Tom Dyson

The media have given London a new nickname: Reykjavik-on-Thames.

Britain's economy revolved around banking. British banks hold about $4.4 trillion in foreign debt. The total size of the UK economy is $2.1 trillion. This year, the British government nationalized major parts of the UK's banking system. In total, the UK Treasury is on the hook for over $2 trillion in potential liabilities, according to an estimate by the Office of National Statistics.

But Britain is NOT going to be the world's biggest national bankruptcy. The government debt of the United Kingdom is only around $950 billion... or about $15,000 per capita.

This week, the United States Treasury sunk another $30 billion into AIG... its fourth bailout. It also put another $25 billion into Citigroup. The Treasury is now on the hook for as much as $6 trillion in liabilities. Last week, the White House produced its new budget. President Obama wants to run a deficit of $1.75 trillion in 2009.

The Treasury will pay for these bailouts by borrowing money. The Treasury borrows money by issuing Treasury bonds. Tomorrow, for example, it will auction three-year, 10-year, and 30-year bonds. This auction should raise around $60 billion.

The "debt clock" measures the amount of money the government owes its creditors. Today, the U.S. debt clock reads $11 trillion. To pay off this debt tomorrow, the government would have to collect $36,000 from every American.

But America is NOT about to be the world's biggest bankruptcy.

Of the major industrial economies in the world, Japan's government is the most indebted.

Since its recession began 20 years ago, Japan has plowed trillions into its banking system via numerous bailout programs. Japan's mantra is growth without cost. As a result, the Japanese government has built up the world's most crippling debt load.

The government of Japan owes $7.8 trillion. That's $157,000 per capita.

We've been using government debt per capita to compare the government debts of Britain, the United States, and Japan. But government debt to GDP is the ratio economists use to compare the indebtedness of countries. The UK has a government debt-to-GDP ratio of 48%. The U.S. has a government debt-to-GDP ratio of 75%. Japan has a government debt-to-GDP ratio of 187%.

If there's going to be a major sovereign bankruptcy, it's going to happen in Japan. Its economy is a shambles. For years, Japan has relied on exports... but even that's drying up now. In January, Japan's exports plunged 47%, producing a trade deficit. People talk about Japan as a "nation of savers." But that's not true anymore. Japan's personal savings rate has collapsed from 16% in the early 1990s to 2.2% last year.

Japan has an aging population and no immigration. I can't see where it's going to find the money to pay off its huge pile of debt.

The way to play the collapse in Japan is by shorting the yen. Right now, the Japanese yen is the world's most popular currency. Traders perceive it as a safe haven. In 2008, the yen was the world's best performing currency.... Rising 33% against the Canadian dollar, 40% against the British pound, and 19% against the dollar.

Back in January, I told you a fall in the yen was all but inevitable. The yen is down 12% since that article. But according to
a Merrill lynch report I saw yesterday, large speculators still have a $3.7 billion long position in yen futures. The analyst described it as "crowded."

The Japanese yen has been in a 40-year bull market. I think a new long-term bear market has just started... and it will end in the bankruptcy of Japan's government. FXY is the ETF for the Japanese yen. When then yen falls, this fund falls, too. The easiest way to bet on a fall in yen is to short this fund or buy put options on it.

Source: Daily Wealth

[winston]

This Major World Currency Is About to Plummet By Tom Dyson

"I had no place to stay and I wanted the police to take care of me," said the 79-year-old Japanese woman. She had just slashed two people with a knife so the police would take her to jail.

A "gray" crime wave is sweeping Japan. According to the UK's Independent, people over 65 years old make up 10% of Japan's prison population, the highest rate of incarceration for pensioners in the industrialized world. Another source reported Japanese pensioners were responsible for one in seven arrests last year, up from one in 25 a decade ago.

The surge in "senior crime" is so dramatic, the Japanese government recently earmarked $80 million to build special wards at three prisons to accommodate the elderly. They are fitting these prison wards with metal walkers and support rails.

Japan has the second-lowest birth rate in the industrialized world. The birth rate to sustain a population is 2.1 per woman. In Japan, the birthrate has fallen below 1.2. Japan's population fell for the first year in 2005. By 2050, if trends continue, Japan's population will fall by 20%.

The other problem is life expectancy. It's going up in Japan. So the elderly are becoming the largest segment of Japan's population. Right now, 20% of Japan's population is over 65 years old. By 2050, 40% of Japan's population will be over 65 years old. In the U.S., the "65 and up" population makes up about 12% of society.

"Gray" crime is one bi-product of Japan's demographics. Here's another byproduct in the society that ages and shrinks at the same time: It'll bankrupt the Japanese government.

First, there's a much smaller workforce to pay taxes. The economy shrinks. Businesses pay less tax, too. Second, the elderly consume social security, health care, and pension resources. These are costs to the government. As the senior population rises, these liabilities increase. The elderly don't pay income taxes.

Since its recession began 20 years ago, Japan's government has plowed trillions into its banking system via numerous bailout programs. In the last six months, for example, Japan's government has authorized three stimulus plans totaling around $100 billion. This month, the Japanese government will give every person in Japan a check for 12,000 yen... about $120... to stimulate the economy. This program will cost the government another $20 billion. And this week, the Japanese prime minister suggested the largest bailout plan yet... putting the Japanese taxpayer on the hook for another $200 billion.

As a result of all this spending, the Japanese government has built up the world's most crippling debt load and budget deficit. Right now, the government of Japan owes $7.8 trillion to creditors. That's $157,000 per person. This year, it'll have to borrow another $1.1 trillion to make ends meet.

Government debt to GDP is the ratio economists use to compare the indebtedness of countries. The UK has a government debt-to-GDP ratio of 48%. The U.S. has a government debt-to-GDP ratio of 75%. Japan has a government debt-to-GDP ratio of 187%.

Now Japan's economy is a shambles. For years, the Japanese have relied on exports to support their economy... but exports have dried up. In the last six months, Japan has lost almost a quarter of a trillion dollars from the decline in its exports. In January, Japan's exports plunged 47%... producing a $9 billion trade deficit. This is Japan's first trade deficit in 13 years and its biggest deficit in 25 years.

When you consider the debt, the bad economy, and the coming population problem, it's clear the Japanese government will never pay off the money it owes.

There are two ways to play the collapse in Japanese government finances. JGBs are 10-year debts of the Japanese government, denominated in yen. The JGB future trades for around $140 right now... and because the yield on JGBs is almost zero (1.2%), it's nearly impossible for these bonds to increase in value. It's a great trade to short these, but you'll need a futures trading account with a company like Interactive Brokers to do it.

My second idea is much easier: Short the yen. The Japanese yen has been in a 40-year bull market. Now it's beginning a 40-year bear market. FXY is the ETF for the Japanese yen. You should be able to sell it short with any discount broker.

Source: Daily Wealth

[winston]

Japan Housewives to Shun Currency Markets on New Rule (Update1) By Yasuhiko Seki and Hiroko Komiya

July 2 (Bloomberg) -- A plan to increase restrictions on Japan’s margin-trading market may drive individual investors away, paving the way for more volatile currency movements, according to JPMorgan Chase & Co.

Japan’s Financial Services Agency, which regulates the nation’s margin-trading industry, intends to cap the leverage permissible on currency trades at 50 times the amount of cash being committed starting in 2010, and reduce it to 25 times in 2011. This is likely to deter individual traders, many of whom are housewives, who the central bank says help to stabilize currency trading by buying on dips and selling into rallies.

“Restrictions on leverage could trigger an exodus of forex margin traders,” said Junya Tanase, a foreign-exchange analyst in Tokyo at JPMorgan, the second-largest U.S. bank by deposits. “As margin accounts typically trade with a ‘buy on dips, sell on rallies’ strategy, flows from those trades have played a key role in containing market volatility.”

Some 90.5 percent of individual currency traders oppose restrictions on leverage, and up to 20 percent say they may quit the market if the FSA mandates a limit on leverage, according to a survey of 2,665 individual traders conducted by private- research institute Yano Research Institute Ltd.

“From the standpoint of housewives, who trade currencies using small amounts of sugar-bowl savings, having high leverage is a critical part of foreign-exchange investments,” said Mayumi Torii, a housewife who chronicled her market experiences in a 2007 book titled: “My Method for Earning 1 Million Yen a Month by Trading Currencies.”

400 Times

Four of the 120 currency margin brokerages in Japan allow clients to trade up to 400 times the amount of their deposits, while one provides leverage of just 20 times. Combined deposits in these accounts climbed to 696.4 billion yen ($7.3 billion) as of March 2008, the most recent date for which an estimate is available, according to Yano Research.

Traders who use these accounts, who collectively came to be called “Mrs. Watanabe” because housewives in Japan traditionally controlled the purse strings, are seen as providing stability to the foreign-exchange markets due to their trading strategy.

“The gnomes of Zurich were accused in their day of destabilizing markets,” Bank of Japan Deputy Governor Kiyohiko Nishimura said in 2007. “The housewives of Tokyo are apparently acting to stabilize them.”

The “gnomes of Zurich” was a term used by U.K. politician Harold Wilson to describe financial speculators based in the Swiss city who were speculating against the pound.

Rising Volume

The average trading volume of foreign currencies in Tokyo swelled to $302.5 billion a day in April 2008, according to a survey by the Foreign Exchange Market Committee.

Currency margin traders now account for between 20 to 30 percent of daily turnover on average, JPMorgan’s Tanase said.

Some regulators are worried that margin-trading accounts are loading up brokerages with too much risk.

“Rising leverage on foreign-exchange investments may yield unexpectedly large losses beyond deposits that customers have set aside at brokerages,” Takafumi Sato, commissioner of the Tokyo-based Financial Services Agency, said June 1.

‘Resident Evil’

Foreign-exchange margin trading has surged in popularity in Japan since it was deregulated in 1998 as investors sought to earn higher returns than are available on government bonds in a country with a benchmark interest rate of 0.1 percent.

If currency volatility increases, corporations that earn revenue or build products overseas will have to spend more to hedge their foreign-exchange holdings or risk seeing currency fluctuations undermine earnings.

Capcom Co., a Osaka-based video-game publisher known for its “Resident Evil” series, says rising volatility in the yen may endanger its plans to boost the ratio of its game titles sold outside Japan to 65 percent of sales in the next two to three years.

“Fluctuations of the foreign-exchange rate do affect our overseas earnings,” said Ryosuke Tanaka, head of Capcom’s investor relationship department. “But since our company has a set rule of not hedging our overseas sales, we simply have to take it.”

Caps on leverage may put more pressure on households struggling to make ends meet during the recession, said Torii, who also founded a support group for home traders.

“There are women who raise children on their own by the earnings they make from FX margin trading, and I feel sincerely sorry for them, given the implications that the new rule may have,” she said. ‘If the lower leverage is implemented fully, individual investors may simply switch their playground to overseas markets.”

Don’t ‘Kill’ Market

Japanese regulators should be more flexible on trading rules, said Makoto Utsumi, president and chief executive of Japan Credit Rating Agency Ltd.

“What’s important is to not kill the new market, which now offers an alternative investment opportunity for retail investors who are languishing from zero interest rates, and to make sure the rules aren’t excessively strict compared with those in overseas markets” said Utsumi, who was formerly the top currency official at the Ministry of Finance

[winston]

Yen to Fall as Tax-Free Repatriation Boost Fades, Chandler Says
By Thomas R. Keene and Oliver Biggadike

Oct. 9 (Bloomberg) -- The yen will probably decline against the dollar over the next 12 months as “momentum” fades from a tax break that encourages repatriation of overseas profits to Japan, according to Brown Brothers Harriman & Co.

Japan’s currency traded today within 1.5 percent of its lowest this year versus the dollar as signs of a global economic recovery boosted the appeal of funding investments with the greenback instead of the yen. Since April 1, Japanese exporters have been able to bring back income earned outside the country without paying the combined 40 percent tax.

“It’s largely momentum trading right now and we’re pushing it because we haven’t reached a pain threshold of anything to stop us,” said Marc Chandler, global head of currency strategy at Brown Brothers in New York.

“The most telling fact about Japan is that by the end of next year they’re going to have three million fewer workers than they did in 2005,” Chandler said, speaking in New York at a foreign-exchange conference sponsored by Bloomberg LP, the parent company of Bloomberg News. “That simple statistic tells you a lot about the challenges Japan has.”

http://www.bloomberg.com/apps/news?pid= ... NS2vIcjqPM