Forex Flash: Tracking Japanese household investment – ANZ

Recent attention had focused on the record sales of AUD bonds by Mrs. Watanabe (the personification of Japanese households) as a reason for the underperformance of AUD/USD. There has however been much less attention on Mrs. Watanabe’s NZD bond holdings, which had increased contrary to expectations.

According to Wei Liang Chang, FX Strategist at ANZ, “Mrs. Watanabe holds a large amount of wealth that is often invested into higher-yielding foreign currency assets. Toshin (or Japanese publicly offered investment trusts) data puts the total amount of FX assets owned by Japanese retail investors at USD $280B as of December 2012. To put this in perspective, a small 1% re-allocation in assets amounts to flows of USD $2.8B - approximately the size of the annual basic balance of small economies such as Australia (USD-5.5bn) and New Zealand (USD-1.6bn). Thus, Japanese households’ investment flows can have substantial and outsized influences in the foreign exchange markets that are their habitats.”