Japan margin FX about 10 pct of spot yen trade-BOJ

TOKYO Aug 27 (Reuters) - Japanese leveraged margin trading may account for about 10 percent of yen spot trades conducted globally each day, a Bank of Japan report said on Wednesday, underscoring the growing clout of Japan's retail investors.

While the size of their outstanding positions has declined compared with before the flare-up of the credit market turmoil last August, trading volumes have increased, the report said.

"The impact of foreign exchange margin trading on the foreign exchange market has grown recently, and they are even drawing attention at international meetings," it said.

The report was written by BOJ officials tasked with monitoring foreign exchange markets for the central bank's financial markets department.

Japanese retail margin traders were using less leverage when making bets on currencies compared with before the onset of the credit market turmoil, the report said.

But the number of trading accounts has increased, and quarterly trading volumes rose to 230 trillion yen ($2,106 billion) in first quarter of this year, up more than four times from about 50 trillion yen in the first quarter of 2006, it said.

Margin trading, which allows investors to make leveraged bets on currencies, has grown increasingly popular among Japanese retail investors in the past few years.

Tired of low interest rates available at home, Japanese retail investors have been active buyers of higher-yielding currencies against the yen, trading from computers at home or even on mobile phones.

Citing figures compiled by the Bank for International Settlements and the Financial Futures Association of Japan, the report said Japanese margin trading may account for roughly 10 percent of all yen spot transactions conducted around the world each day.

"Such data shows that Japanese retail investors have become major players in the foreign exchange market, along with domestic and overseas institutional investors, exporters and importers, and hedge funds," the BOJ's report said.

Based on BIS data, the volume of global yen spot transactions totalled $206 billion per day in April 2007, or roughly 24.5 trillion yen based on the dollar/yen exchange rate at the time of around 119 yen.

Calculations based on data compiled by the Financial Futures Association of Japan show that daily trading volumes from Japanese margin trading totalled 1.9 trillion yen in the first quarter of 2007, the BOJ's report said.

That would be equal to around 7.7 percent of all yen spot trades conducted globally.

In the first quarter of 2008, daily trading volumes from margin trading rose to around 3.6 trillion yen per day, or roughly 14.5 percent of all yen spot trades around the world, the report said.

In a caveat, the BOJ report said some of the margin trade transactions may not appear as actual flows in the foreign exchange market. ($1=109.21 Yen) (Reporting by Masayuki Kitano; Editing by Michael Watson)