Demand for Yen Sales Linked to New NISA Sparks Long-Lasting Trading Theme

TOKYO (Reuters) – In the foreign exchange market, demand for yen sales linked to the new NISA (Small Investment Tax Exemption System) is likely to become a long-lasting trading theme. Yen sales due to foreign stock investment using the system were estimated to exceed 800 billion yen in January.

It is also possible that the amount has increased due to the start of the new system. However, if this momentum continues, annual yen sales will reach nearly 10 trillion yen, a size comparable to last year’s trade deficit, which will be a source of motivation for profit-seeking domestic and foreign investors short term. It is also easy to get caught.

Mr. Toru Sasaki, chief strategist of Fukuoka Financial Group, investigated new cash inflows into 25 funds of foreign stock investment trusts (non-currency hedged) popular under the new NISA, and found that the monthly inflow amount for January the total after deduction was 820 billion yen.

Before the start of the new NISA, the amount of inflows to the 25 funds in December last year totaled 320 billion yen, which means that it has increased 2.5 times in one month after the start of the system.

In Japan, it has become common for stocks and investment trusts to account for less than 20% of household financial assets. For this reason, the general view in the market was that even if the new system were to come into effect, “it is unlikely to lead to a rapid increase in high-risk foreign stock investment” (foreign bank strategist) .

However, early in the new year, when it was revealed that more than 100 billion yen of money had flowed into Mitsubishi UFJ Asset Management’s “eMAXIS Slim Worldwide Stocks (All Country)”, a popular investment trust that applies on for the new NISA, in one. “New NISA Yen Selling” was suddenly a hot topic.

In the foreign exchange market, the dollar rose from a low of 140 yen on January 2 to a low of 148 yen on the 19th, appreciating the dollar and devaluing the yen by almost 8 yen in just two and a half weeks. The transfer of funds under the new NISA and the transactions made by investors seeking profit from the funds may have had some influence.

One foreign bank official said, “Short-term investors at home and abroad took advantage of the popularity of the new NISA and started selling the Yen one after another,” adding that the pressure on the Yen to depreciate further increased.

Among those trying to proactively sell the Yen, there are many rumors going around about the timing of capital inflows to funds and the execution of trades. The day after the NISA payment date the major securities company is discussed as a possible option.

All Country Mitsubishi UFJ Asset had total net assets of 2,276.8 billion yen at the end of January, an increase of more than 400 billion yen in the past month. Mr Sasaki Fukuoka FG commented on the new NISA, saying that together with the trade deficit in goods and services, foreign direct investment which has started to increase again, and the secondary income imbalance which is on the rise, “it comes is new large-scale yen selling pressure.” notes.

(Shinji Kitamura Editing by Hiroshi Hashimoto)

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