By some definitions Japanese investors in their 60s and 70s – who have been venturing abroad in increasing numbers because of low domestic interest rates – do not count as Yen carry traders at all. Rather than borrowing to invest in non-yen assets, they simply transfer yen savings into investment trusts with foreign portfolios or into?so-called?uridashi?bonds, foreign-currency-denominated paper issued in Japan.
But the effect is the same. Their transactions have put downward pressure on the yen and upward pressure on the currencies and assets into which their investments flow.
http://www.euro2day.gr/articlesfna/30079254/
Outflow of yen puts Japanese central bank in a bind
By Mayumi Otsuma Bloomberg News
Published: June 11, 2007
http://www.iht.com/articles/2007/06/11/ ... /sxyen.php
TOKYO: In Japan, sending yen overseas for higher returns is no longer just a game for banks and hedge funds. Michiko Takeda is playing too.
Takeda, a 46-year-old homemaker from Sapporo City, is among a growing number of individual investors joining fund managers in shifting money out of Japan, where interest rates are the lowest of any major economy. Last year she put ¥2 million, or $16,500, in an Australian bank, and "even with exchange-rate risks, I'd like to invest more," she says.
The exodus of yen is driving the currency to record lows - and ratcheting up pressure on the Bank of Japan governor, Toshihiko Fukui, and fellow policy makers to increase interest rates as soon as next month to encourage a controlled rise in the yen.
The concern is that the longer they wait, the greater the chance that external forces might lead to a sudden, sharper rebound that might cripple Japan's economy and shake consumers.
"A jump in the yen could cause a disaster," says Hiroshi Shiraishi, an economist at Lehman Brothers Japan in Tokyo. "It would probably hurt the whole economic cycle, starting from exports."
...
Takeda says she is willing to take that chance. Her one-year deposit at Australia and New Zealand Banking Group is paying 7 percent annual interest. Mitsubishi UFJ Financial Group, Japan's largest bank, pays 0.35 percent for the same period and amount.
Such interest-rate disparities are drawing yen out of the country at an accelerating pace. Foreign banks sent ¥21.9 trillion abroad through their Japanese branches as of March 31, an increase of 31 percent from a year earlier, according to the Bank of Japan.
Japanese mutual funds increased the percentage of foreign assets they hold by 47 percent to ¥32.2 trillion in the year that ended April 30, according to the Investment Trusts Association of Japan. Foreign assets now account for 43 percent of the ¥75.9 trillion total held by the funds.
