The prospects for the Federal Reserve to cut interest rates during the year, the Bank of Japan's “hawk release”, and possible foreign exchange intervention failed to boost the yen. At the same time, it seems that the Japanese are still “shorting” the yen.

Citi said in a May 10 report that household savings in Japan are showing a steady shift towards investment, which has an important impact on the trend of the yen.

Earlier, Bank of Japan Governor Ueda Kazuo “released an eagle,” causing the yen to once again fall below the key level of 155. The report points out that the market has now reached a consensus that the yen will remain weak for a period of time. Citi expects the yen to remain around 155.

“Mrs. Watanabe” is turning to investment

Wall Street News mentioned earlier that since some Japanese retail investors are housewives who are in charge of household finances, the market cleverly gave them a code name: Mrs. Watanabe (Watanabe is now the fifth largest surname in Japan; about 1.08 million people in Japan have the surname “Watanabe”).

Since “Mrs. Watanabe” generally experienced the transition process from peak to extreme decline in the bubble era, she has a stronger sense of risk aversion.

Over the past 25 years of deflation, “Mrs. Watanabe” preferred to hold cash savings. As of the third quarter of last year, financial assets held by Japanese households exceeded 2120 trillion yen (about 14 trillion US dollars), of which 52.5% were cash and deposits (about 7.35 trillion US dollars).

But now, the status of yen cash and deposits as assets in the minds of Japanese people has changed. According to the report data, at the end of the 3rd quarter of FY2024, household savings cash experienced the first month-on-month decline since the 3rd quarter of FY2012.

According to the report, “Mrs. Watanabe” is increasingly turning deposits into risky assets.

According to the data, foreign currency deposits and foreign securities investments in trusts held by households show a marked increase in foreign currency-denominated assets, and the weight has basically remained stable.

The report said that due to the huge size of deposit funds, under this investment trend, a significant portion of Japanese capital will flow into foreign securities investment. The report bluntly stated that even if only 1% of total assets flowed into foreign currency, it would mean that more than 20 trillion yen (about 128.4 billion US dollars) would be sold off, further exacerbating the weakening of the yen.

The report data also shows that in the Japanese government pension investment fund GPIF (typical representative of long-term diversified investors), foreign currency assets account for 50% of total assets.

However, the report also added that since savings tendencies are still strong, yen deposits still account for the majority of total assets, and there has been no significant change in weight.

This year, the Japanese government plans to issue a new 10,000 yen note, which may strengthen the saving trend.

According to estimated data, the current amount of household cash savings is about 70 billion yen, which is double what it was before the Bank of Japan withdrew from the negative interest rate policy in March.

edit/emily