Japan's office workers, housewives flock to forex

By Masayuki Kitano

TOKYO, July 3 (Reuters) - Japanese retail investors play a growing role in the foreign exchange market, with the volume of currency margin trading on the Tokyo Financial Exchange (TFX) jumping 45 percent in June from May, data showed on Tuesday.

Fed up with near-zero interest rates at home, Japanese retail investors -- who tend to be office workers or housewives trading online -- have been turning to leveraged foreign exchange trading, which allows them to place large bets on currencies with relatively small amounts of money.

Bank of Japan board member Kiyohiko Nishimura earlier this week touched on the rising influence of Japanese retail traders.

"Years ago, it was the gnomes of Zurich who shook the foreign exchange markets. They have now been replaced by the housewives of Tokyo, who speculate in various currencies," Nishimura said.

The volume of all forex margin trading contracts traded on the TFX, a financial futures exchange, rose to 3,946,942 contracts in June, up from 2,718,622 lots in May, data from the exchange showed.

Trading volume ballooned more than four times from June of last year, and volume in the first six months of this year climbed to 15,096,929 lots, exceeding the total for all of 2006.

Margin traders who sell yen for higher-yielding currencies, as well as Japanese households infatuated with investment trusts targeting overseas assets, have been key factors in the yen's broad slide this year.

Margin trading on the TFX accounts for only a portion of all margin forex trading in Japan, but their data is often used by market players to gauge the broader trend.

Nishimura said the investors have employed contrarian strategies that have helped to push down volatility in dollar-yen moves. But he added that it was unclear how long this could persist and warned of the possible impact in the event of any major switch.

"A sudden change in their behaviour is likely to shift the direction and the magnitude of trading in many foreign exchange markets," Nishimura said.

Hampered by Japan's low interest rates, the yen fell to a record low against the euro of 167.20 yen on electronic trading platform EBS on Tuesday.