Last week, investors were forced to sell their stocks as the Nikkei index experienced its largest drop in nearly 40 years, resulting in a sharp decline in margin trading, or trading with borrowed money on the Japanese stock market. based on numbers Japanese retail investors enjoy margin trading, which involves increasing stock market bets by borrowing cash from brokerages.
According to exchange data, margin trading accounts for roughly 70% of retail trading value. According to Japan Exchange Group (8697), the value of shares purchased on margin decreased by 907 billion yen ($6.15 billion) to 4 trillion yen in the week ending August 9 from 4.87 trillion yen the week before which runs the Tokyo Stock Exchange, opens a new tab.
The sum hit a record high of 4.98 trillion yen in the seven day stretch of July 26. On August 5, the market experienced its largest single-day decline of 12.4%, which was followed by a 10% recovery the following day.
By August 5, the index had fallen as much as 27% from its July high of over 42,000. It has since recovered, and as of early Thursday, it was trading around 36,721.
Why It Is Critical Leveraged retail traders, who account for approximately 20% of Japan’s brokerage trading value, may be reluctant to return for a while due to the sharp decline in shares purchased on margin. Margin trading helps investors increase their trading volumes, but when the market is down, it increases losses by forcing investors to sell shares.
