USD/JPY: Will the New NISA Become a Catalyst for Growth
2024-02-20
■ Based on the correlation since 2020, it is expected that the increase in the US dollar/yen after 2024 will exceed the expansion of the Japanese US interest rate spread
■ Currently, the introduction of the new NISA is only one of the backgrounds and needs to be considered in conjunction with other factors that lead to the depreciation of the Japanese yen
After 2024, the rise of the dollar/yen seems to have broken the correlation between the 10-year treasury bond yield difference between Japan and the United States and the dollar/yen exchange rate. Using data from March 2020 (Refinitiv) for preliminary calculations, as of February 16, the former is 3.56%, and the corresponding USD/JPY exchange rate is approximately 144.20 yen. Although the former has expanded by 32 basis points since the end of last year, the closing price of the US dollar/yen on February 16th was 150.21 yen, which is explained as "the rise of the US dollar/yen exceeds the widening of the 10-year Japanese US Treasury bond spread".
During this period, speculators have expanded their net selling positions against the Japanese yen. However, based on data from the US Commodity Futures Trading Commission (CFTC), which summarizes the trades of some speculators, their net positions have increased to approximately 111000 as of February 13th, compared to 80000 as of January 30th. It is worth noting that it reached 151.90 yen in October 2022 and 130000 yen in November 2023. Although speculators have widened their short selling of the yen, pushing the US dollar/yen into the 150-yen level, there may be other factors contributing to the depreciation of the yen in January.
Recently, attention has been paid to the impact of the new non-taxable system for small investments (NISA) introduced in 2024. Confirm through two pieces of data. (1) According to the "External and Internal Securities Purchase and Sale Contracts and Other Conditions" released by the Ministry of Finance on February 8th, the "Investment Trust Commission Company" purchased approximately 1.3 trillion yen of overseas assets, with purchases exceeding 300 billion yen per month in 2020, 2021, and 2023. In addition, (2) According to the "Investment Trust Overview" released by the Investment Trust Association on February 15th, the overseas purchases of publicly offered Zhuzhou style investment trusts exceeded about 800 billion yen, and the monthly purchases since 2021 have exceeded 300 billion yen. The introduction of the new NISA, as seen in (1) and (2), can be explained as a new factor leading to the depreciation of the Japanese yen in January's single-month results.
However, it may be too early to view the new NISA as the main scenario for the US dollar/yen forecast, and believe that it will lead to further depreciation of the yen. We need to observe the scale of regular capital inflows in the next year or so. Indeed, data on the inflow and outflow of funds from public investment trusts since 2020 indicate that investments in overseas assets account for over 60% of the overall data from multiple companies, and this trend is evident. On the other hand, as a factor leading to the depreciation of the Japanese yen, there is also Japan's trade deficit, as the Japanese stock market rises, overseas investors engage in additional yen selling hedging flows, as well as Japanese companies acquiring overseas companies. Many factors that need to be considered and it is difficult to classify them as one factor. We hope to continue verifying in the future whether Japanese individual investors' investments in overseas assets will become a new pillar for selling yen.
■ Currently, the introduction of the new NISA is only one of the backgrounds and needs to be considered in conjunction with other factors that lead to the depreciation of the Japanese yen
After 2024, the rise of the dollar/yen seems to have broken the correlation between the 10-year treasury bond yield difference between Japan and the United States and the dollar/yen exchange rate. Using data from March 2020 (Refinitiv) for preliminary calculations, as of February 16, the former is 3.56%, and the corresponding USD/JPY exchange rate is approximately 144.20 yen. Although the former has expanded by 32 basis points since the end of last year, the closing price of the US dollar/yen on February 16th was 150.21 yen, which is explained as "the rise of the US dollar/yen exceeds the widening of the 10-year Japanese US Treasury bond spread".
During this period, speculators have expanded their net selling positions against the Japanese yen. However, based on data from the US Commodity Futures Trading Commission (CFTC), which summarizes the trades of some speculators, their net positions have increased to approximately 111000 as of February 13th, compared to 80000 as of January 30th. It is worth noting that it reached 151.90 yen in October 2022 and 130000 yen in November 2023. Although speculators have widened their short selling of the yen, pushing the US dollar/yen into the 150-yen level, there may be other factors contributing to the depreciation of the yen in January.
Recently, attention has been paid to the impact of the new non-taxable system for small investments (NISA) introduced in 2024. Confirm through two pieces of data. (1) According to the "External and Internal Securities Purchase and Sale Contracts and Other Conditions" released by the Ministry of Finance on February 8th, the "Investment Trust Commission Company" purchased approximately 1.3 trillion yen of overseas assets, with purchases exceeding 300 billion yen per month in 2020, 2021, and 2023. In addition, (2) According to the "Investment Trust Overview" released by the Investment Trust Association on February 15th, the overseas purchases of publicly offered Zhuzhou style investment trusts exceeded about 800 billion yen, and the monthly purchases since 2021 have exceeded 300 billion yen. The introduction of the new NISA, as seen in (1) and (2), can be explained as a new factor leading to the depreciation of the Japanese yen in January's single-month results.
However, it may be too early to view the new NISA as the main scenario for the US dollar/yen forecast, and believe that it will lead to further depreciation of the yen. We need to observe the scale of regular capital inflows in the next year or so. Indeed, data on the inflow and outflow of funds from public investment trusts since 2020 indicate that investments in overseas assets account for over 60% of the overall data from multiple companies, and this trend is evident. On the other hand, as a factor leading to the depreciation of the Japanese yen, there is also Japan's trade deficit, as the Japanese stock market rises, overseas investors engage in additional yen selling hedging flows, as well as Japanese companies acquiring overseas companies. Many factors that need to be considered and it is difficult to classify them as one factor. We hope to continue verifying in the future whether Japanese individual investors' investments in overseas assets will become a new pillar for selling yen.