Shifting Japanese Retail

Various reports have highlight the increasing importance of the retail community in Japan. Some official estimates suggest for example that retail investors could account for a quarter of the yen turnover in Tokyo, while some industry estimates put the number significantly higher.

Japan's Investment Trust Association notes a significant shift in Japanese retail investment preferences. Euro-denominated investment trusts saw a 14.3% decline in May to JPY3.92 trillion. Part of this likely reflects valuation swings. The euro declined a little more than 10% against the yen in May, for example and the underlying investment, especially in equities and non-German bonds also lost value. The Nikkei reported that investment trusts that mainly target European stocks and bonds have seen reported their 33rd and 20th consecutive month of outflows respectively in May.

Funds in Australian dollar-denominated trusts fell 9.% to JPY4.9 trillion. Over the course of May, the Australian dollar lost about as much as the euro did against the Japanese yen.

This is the first time that the funds in Australian dollar trusts exceeded the funds in the euro denominated trusts. The funds in the US dollar-denominated trusts are greater than the euro and Australian dollar trusts put together. At the end of May, the US dollar trusts were valued at JPY9.76 trillion.

Overall the assets in the foreign currency trusts fell 8.2% in May to JPY27.52 trillion. The overall value of the publicly offered trusts fell 7.5% to JPY60.5 trillion.

The more stable tone of the euro and Australian dollar thus far in June, with the yen the weakest of the G10 currencies, somewhat better figures from Japanese investment trusts is possible. That said, retail Japanese investors seem to behave much more as trend followers than mean reversion players.