[Opinion] Mrs. Watanabe

“Watanabe” is one of the most common family names in Japan. On the global financial stage, however, the performance of the “Watanabes” is anything but common.

“Watanabes” is a term referring to Japanese housewives who are involved in the yen-carry trade, borrowing yen at a low yearly interest rate of 0.5% and investing the money in high-yield overseas financial products.

“Mrs. Watanabe” accounts for 30% of the Tokyo foreign currency market. The amount of transactions is 15 billion dollars each day, more than double compared to last year. The term “Mrs. Watanabe” came up first in New Zealand. New Zealand, with an 8% interest rate, is the most favorable investment target of the Watanabes. What they do is put the foreign currency in their local bank accounts, then purchase bonds or fixed deposit products. Then they gain high profits from the interest.

Watanabes have long been cause for concern in the financial market because their behavior has led to a skyrocketing New Zealand currency.

New Zealand’s Finance Minister Michael Cullen, before the National Assembly on July 21, officially blamed the Watanabes for soaring exchange rates. Some joked, “The central bank should fight with Mrs. Watanabe to stabilize the currency.”

The U.S. sub-prime mortgage crisis rocked the global financial market recently, but Watanabes are getting attention from all over the world, not just New Zealand.

The global stock market has stabilized, but there are signs in its aftermath of increased demand for stable currencies like the greenback or yen, which will in turn lead to the withdrawal of yen-carry trade money. If the Watanabes join the bandwagon of withdrawing yen-carry trade money, the global financial market will once again be put into a swirl. The Economist reported, “Mrs. Watanabe will stay because there are still big differences between interest rates.” By contrast, the Financial Times reported “There are signs of changes in the Watanabes, who have kept peace in the global market.” Kwon O-kyu, Korea’s finance minister, was once criticized when he showed his feelings of insecurity too explicitly. Yet, the government may have to remain vigilant about the movement of Japanese ajummas.

Huh Mun-myeong, Editorial Writer, angelhuh@donga.com