The main force of shorting the yen: the Japanese themselves?

The prospect of a Fed rate cut this year, the Bank of Japan's "hawkishness" and possible foreign exchange intervention failed to boost the yen, while the Japanese seem to be "shorting" the yen. Citi said in its May 10 report that household savings in Japan are showing a steady shift to investment, which has an important impact on the direction of the yen. Earlier, Bank of Japan Governor Kazuo Ueda's "hawkishness" caused the yen to fall below the key level of 155 again. According to the report, there is a consensus that the yen will remain weak for some time, and Citi expects the yen to remain around 155.

"Mrs. Watanabe" is turning to invest in Wall Street, as mentioned earlier, because some retail investors in Japan are housewives who are in charge of household finances, the market has cleverly given them a code name: Mrs. Watanabe (Watanabe is now the fifth most popular surname in Japan, and there are about 1.08 million people in Japan with the surname "Watanabe"). Because "Mrs. Watanabe" has generally experienced the transition from the peak of the bubble era to the extreme decline, because she has a stronger sense of risk aversion. During the past 25 years of deflation, the "Watanabe Lady" preferred to hold cash savings. As of the third quarter of last year, Japanese households held more than 2,120 trillion yen ($14 trillion) in financial assets, of which 52.5% were cash and deposits ($7.35 trillion). But nowadays, the status of yen cash and deposits as assets in the Japanese mind has changed. At the end of the third quarter of fiscal 2024, household cash savings fell for the first time since the third quarter of fiscal 2012, according to the report. According to the report, "Mrs. Watanabe" is increasingly shifting deposits to risky assets.

The data show that the foreign currency deposits of trust funds held by households and foreign securities investments have increased significantly, and the weights have remained basically stable.

According to the report, due to the large scale of deposit funds, a considerable part of Japanese funds will flow into foreign securities investment under this investment trend. The report bluntly said that even if only 1% of total assets flowed into foreign currency, it would mean that more than 20 trillion yen (about $128.4 billion) would be sold, further exacerbating the yen's weakness. The report also shows that foreign currency assets account for 50% of the total assets of the Japanese government's pension investment fund, GPIF, which is the quintessential representative of long-term diversified investors. However, the report also added that as the propensity to save remains strong, yen deposits are still the majority of total assets, and their weights have not changed significantly.

This year, the Japanese government plans to issue a new version of the 10,000 yen banknote, which may strengthen the propensity to save.

According to estimates, the size of household cash savings is currently about 70 billion yen, which is twice as large as before the Bank of Japan exited its negative interest rate policy in March.

⭐ Star Wall Street news, good content do not miss ⭐ This article does not constitute personal investment advice, does not represent the views of the platform, the market is risky, investment needs to be cautious, please make independent judgment and decision-making.