November 16, 2017 / 11:02 AM / a year ago

Japan considers tightening leverage rule for Mrs Watanabe

TOKYO (Reuters) - Japan’s Financial Services Agency is considering reducing the maximum leverage allowed for margin FX trading to 10 times from the current 25 times, sources familiar with the matter said on Thursday.

FILE PHOTO: U.S. Dollar and Japan Yen notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration/File Photo

The move is aimed at reducing settlement risk in the popular currency margin trading where about 5,000 trillion yen (£33.4 trillion) of funds changes hands annually, mostly among Japanese retail traders, often dubbed “Mrs Watanabe”, they said.

Some Japanese margin traders make speculative currency bets by using high leverage, leaving them vulnerable for a sudden change in the market.

On Jan. 11 last year, the South African rand dived almost 10 percent in early Asian trade to a record low after a large volume of automatic loss-cut selling by leveraged Japanese traders was triggered.

While that did not cause any major settlement problems, it highlighted how Mrs Watanabe’s trading could affect the market.

Reporting by Takahiko Wada, writing by Hideyuki Sano, editing by Nick Macfie

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