Day trading’s popularity surges in Japan

By ASSOCIATED PRESS
Published April 15, 2006

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FUJISAWA, Japan – When Takao Uchida’s plan to launch a business fell through three years ago, he knew right away how to use his 2.5-million yen, or $21,550, in savings. He withdrew it from his nearly zero-interest bank account and bought stocks.Uchida has doubled his money since. The 29-year-old recently quit a job as a computer engineer to become a full-time day trader and heads a company to provide support for hundreds of others like him.”Sometimes I get so carried away I end up skipping lunch. But I have more freedom than working in the office,” Uchida said, watching numbers blink on a pair of computer screens in his tiny apartment near Tokyo. “I’d much rather take on the risk than endure a rigid corporate structure.”For decades, Japanese looked at stock trading as a form of risky gambling – but no longer. Interest in the market is booming, with workers checking their stocks during lunch break and housewives placing orders from home computers. Enthusiasts like Uchida have even become professional day traders.

The number of individual stock investors surpassed 35-million for the first time last year, according to the Tokyo Stock Exchange, up from 27-million in 1995 – an increase of 30 percent.

And they’ve made out well. Buoyed by strong earnings results, Japan’s benchmark Nikkei 225 index surged 40 percent in 2005, and the Mother’s index of 165 emerging ventures has surged 60 percent in the past three months.

The trend has spawned a stream of trading guidebooks with titles such as The World’s Simplest Book of Stocks and Day Trading: This is How to Make Money, taking over large sections of business and investment shelves at bookstores.

Investment clubs are mushrooming, and brokerages and consulting companies regularly organize seminars, sometimes inviting lecturers who have their own followings as “charismatic traders.” Hundreds of blogs put out by amateur traders detail stock performance and share tips.

Analysts say most are online traders who usually place dozens of small-lot orders, which have driven up trading volume and volatility in recent years.

The day trading boom comes amid a general surge in interest in the stock market. The number of accounts at 56 Japanese Internet brokerages surpassed 7.9-million in September, up from 296,941 in 1999, when the nation’s first such brokerage emerged, according to the Japan Securities Dealers Association. About 5 percent of those accounts are thought to belong to day traders.

Trading value through the net brokerages in September hit 22.8-trillion yen ($196.9-billion), or 30 percent of the total – up from just 1.9 percent seven years ago. Nearly one in a dozen Japanese say they want to try stock investment, according to a recent government survey.

Sadakazu Osaki, executive fellow at the Nomura Research Institute of Capital Market, says market deregulation in recent years, including liberalization of brokerage commission, the approval of small-lot trading and the popularity of Internet brokerages, encouraged many Japanese to buy stocks.

“The investment environment has become more accommodating to individuals than ever before,” Osaki said. “And more Japanese are aware that it is unwise to leave their money in (zero-interest) bank accounts.”

Mutual funds are gaining in popularity, including foreign funds such as Indian and Chinese stocks, as well as high-dividend domestic stocks. But the funds are not as popular as direct investment in stocks, partly because of high commission fees and lack of sense of control over investments, analysts say.

The trend is not without its detractors.

Critics often compare day traders to antisocial computer geeks who seek easy profits by just typing numbers on their keyboards, rather than through honest work.

News that two men in their 20s profited hundreds of millions of yen on a trading error by a Japanese brokerage and subsequent system error at the Tokyo Stock Exchange in December drew criticism.

The stock boom, however, has revealed the exchange’s failure to keep up with the pace. The world’s second-largest bourse was forced to shut down trading in January when it was unable to process huge sell orders triggered by prosecutors’ probe of popular Internet portal Livedoor Co.

Livedoor president Takafumi Horie and four other company executives were arrested on suspicion of doctoring financial results, artificially inflating stocks and providing false information about earnings of a subsidiary. The fall of Horie, once idolized as a high-flying investor, shocked many individual investors, especially owners of Livedoor stocks – which plunged almost 90 percent as news of the scandal spread.

Most day traders survived the Livedoor shock, but Horie’s arrest triggered a flurry of criticism that young investors are obsessed with money, not productive, long-term investment.

“Those who dream of becoming billionaires don’t imagine successful investment takes experience and mental toughness,” Hideo Kumano, chief economist at Dai-ichi Life Research Institute, wrote in a recent article in the national Asahi newspaper. “The Livedoor shock was a valuable lesson for new entrants of net trading – that the risks of stock investment are not small.”

Day traders are undeterred.

Dai Tsuchiji, a 29-year-old Osaka day trader and author of The World’s Most Fascinating Book of Stocks, insists risk can be avoided by quickly deciding when to stop, even when one is winning.

“Anyone can enter the market, and chances are equal to all participants, regardless of your sex or level of education. The harder you work, the more you earn,” he said. “To me, stock trading is a dream investment.”

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