A board displaying the Nikkei average (Jiji)

People Power
In 1988, at the height of the bubble, daily volumes on the First Section of the TSE averaged around 1 billion shares. The figure was nearly 2 billion during August 2005 and hit 3 billion the following month (including out-of-hours trades). Daily trading values, an indicator of the total amount of transactions, have also increased. During September, they averaged around ¥2.1 trillion (about $16.6 billion at ¥120 yen to the dollar), surpassing the record set during the bubble, in February 1989, of ¥1.9 trillion.

What is behind these huge volumes? One answer is the widespread view that Japan's economy is on a recovery path after a long period in the doldrums. In addition, there are huge amounts of petrodollars, as well as funds freed up from years of low interest rates worldwide, floating around in search of markets.

But another driving force is day traders - individual investors who use the Internet to conduct large numbers of small-scale transactions. Many day traders are students and housewives trading in small- and mid-cap stocks priced in tens or hundreds of yen. For these investors, small price changes - sometimes as little as ¥1 or ¥2 yen a share - can mean significant profits when the stock is traded quickly and in large volumes on the Internet.

One of the drivers behind this trend has been the adoption by Internet brokerage companies of flat-fee commission systems, in which commission remains constant no matter how many orders the client places. Some analysts believe this system, coupled with the convenience of the Internet, has encouraged people who have never traded before to enter the market. Some day traders are known to make a dozen or more stock transactions a day.

Popular trader Wakabayashi Fumie (© Wakabayashi Fumie)

Stock Stars
These investors are drawing encouragement and inspiration from karisuma toreda (literally "charisma traders") - celebrity share traders whose fame stems from their successful trading strategies. Young female "charisma traders" are proving particularly popular, and some are now familiar faces on television and in magazines. Some of these celebrities have written best-selling books on share trading and write e-mail magazines and hold seminars in which they give advice to beginners.

A survey of the 270 member brokerages of the Japan Securities Dealers Association put the total number of Internet trading accounts in Japan at 6.94 million as of the end of March 2005, up 1.12 million from six months earlier. The total amount of trading from October 2004 to March 2005 exceeded ¥67 trillion ($558 billion), a five-fold jump in two years. Internet transactions accounted for 27% of all trading, compared to 13% two years earlier.

The massive surge in the number of small trades has been putting huge technical strains on the computer systems that stock markets use to conduct transactions. On November 1, a computer failure at the TSE resulted in all trading being suspended for three hours. On December 8, meanwhile, the TSE system was unable to cancel a mistaken sell order placed by Mizuho Securities for a large number of J-COM Co., Ltd. shares. The TSE president resigned to take responsibility for these mishaps, which have affected day traders as well as large brokers. The exchange has vowed to bolster its systems to prevent a reoccurrence of such problems.

Japanese savers have been diversifying their assets into shares and government bonds for several years now, and the emergence of individual investors actively managing their portfolios over the Internet is a sign that this trend is set to continue as the Japanese economy gathers steam.

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Copyright (c) 2006 Web Japan. Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.