Yen-repatriation 'fiesta' becomes legacy as more Japan exporters move abroad

TOKYO Thu Mar 27, 2014 3:19am EDT

An employee of a foreign exchange trading company working is seen between the national flags of Japan and the U.S. in Tokyo January 6, 2014. REUTERS/Yuya Shino

An employee of a foreign exchange trading company working is seen between the national flags of Japan and the U.S. in Tokyo January 6, 2014.

Credit: Reuters/Yuya Shino

TOKYO (Reuters) - For yen traders, March used to be a month when they needed to be extra careful in selling the Japanese currency because they knew a lot of Japanese exporters would place big yen bids ahead of their financial year end.

But the landscape has completely changed, as manufacturers have less money to repatriate after they moved production abroad.

"Repatriation obviously still takes place this time of the year, but it's no longer a festive-type market event we used to see years ago," said Bart Wakabayashi, head of forex at State Street in Tokyo, referring to flows before the close of the Japanese fiscal year on March 31.

Traders say they saw very limited yen buying from Japanese exporters in recent weeks, including Thursday, the last business day to buy the yen for settlement within the end of financial year.

During the 2000s, the yen gained seven times out of 10 on the last date to convert foreign currencies to the yen.

On Thursday, the yen slipped 0.2 percent in Asian trade to 102.20 yen to the dollar.

The yen hit a five-year low of 105.45 per dollar early this year. While the Bank of Japan's aggressive monetary easing since early 2013 has played a pivotal role in the yen's fall, traders also say the impact of dwindling selling from Japanese exporters should not be overlooked.

"A while back, March was the time for repatriation before book closings but big names that sell Japan-made products overseas have now become a rarity, since they would rather manufacture abroad," said Masatoshi Omata, senior client manager at Resona Bank Tokyo's market trading office.

"Large telegraphic transfer of funds (in the forex market) have dwindled considerably as a result," he said.

Indeed, Japanese exports have still not recovered to pre-Lehman crisis levels, even as the Japanese economy has slowly recovered.

Exports stood at 69.78 trillion yen ($682.04 billion) in 2013, still 17 percent below a record peak of 83.93 trillion yen ($820.35 billion) in 2007.

In addition, imports surged as the country has had to import more fossil fuels after shutting down its atomic power plants in wake of the March 2011 Fukushima nuclear disaster.

As a result, Japan experienced a trade deficit for the third straight year in 2013, with the figure growing to 11.47 trillion yen from 2.56 trillion in 2011.

The weaker yen may persist as Japanese manufacturers have moved production overseas not just to skirt currency rate fluctuations, but also to expand overseas business to offset a shrinking home market hit by an ageing population.

According to a survey of more than 600 Japanese manufacturers conducted by the Japan Bank of International Cooperation (JBIC), respondents expected production outside of Japan to rise to nearly 39 percent in early 2017 from 33 percent in early 2013. The ratio was 26 percent in early 2003.

The shift abroad has been led by the biggest of Japanese corporate names. Toyota Motor Corp (7267.T) made 60 percent of its automobiles outside of Japan in 2012, up from 42 percent in 2003. ($1 = 102.3100 Japanese Yen)

(Additional reporting by Hideyuki Sano; Editing by Kim Coghill)

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