Margin trading in Japanese stocks spikes
12/03/2025 04:02
By Junko Fujita TOKYO, March 12 (Reuters) - Japanese investors are borrowing heavily to buy domestic shares, and the quantum of shares purchased using such leverage is at its highest in seven months. Margin trading, which involves using borrowed cash from brokerages to boost bets in the stock market, is popular among retail investors and shows how bullish they are on the market. BY THE NUMBERS The value of shares bought on margin reached 4.7 trillion yen ($32 billion) in the week ended February 28, up from 4.5 trillion yen the previous week, according to Japan Exchange Group <8697.T> which runs the Tokyo Stock Exchange. Margin trading comprised about 55% of retail trading value that week. That is close to a 4.98 trillion yen peak in July 2024, and approaching the record amount of 5.98 trillion yen in February 2006. WHY IT'S IMPORTANT A large amount of shares bought on margin leaves the Nikkei share average .N225 susceptible to sharp falls because retail traders will be forced to dump stocks if the value of their cash margin drops during a market decline. The Nikkei .N225 fell more than 2% on Tuesday to hit its lowest since September 17, dragged by sharp losses on Wall Street. Shigetoshi Kamada, general manager at the research department of Tachibana Securities said Tuesday's sharp loss was caused by the leveraged investors' offloading their positions. It was similar last year as the Nikkei plunged more than 10% in August in its biggest single-day fall since the 1987 Black Monday crash and the value of shares bought on margin fell sharply. What could, however, cushion the impact this time is bids from companies buying back their shares. Kamada estimates Japanese firms have set aside some 2.5 trillion yen to buy back shares from January to March this year. (Reporting by Junko Fujita Editing by Vidya Ranganathan and Kim Coghill) ((junko.fujita@tr.com))