Bank of Japan’s recent data has revealed that Japanese retail foreign currency deposits have climbed this year as local investors switch out of a weakening yen and zero-yielding local bond markets and into overseas markets with increasing yields.

The data further shows foreign currency deposits at domestic banks rose to 26.58 trillion yen (USD 182.38 billion) at the end of August, an 8.3 per cent rise since the start of the year. That rise in deposits in the first eight months of this year was the highest since 2015.

Most of the increase is primarily attributable to the change in valuations due to the weaker yen. However, there was a big increase even after adjusting for nominal exchange rate changes in the yen.

Also, foreign exchange margin trades, in which retail investors can borrow up to 25 times their cash as leverage, have seen a jump this year. Margin trading volume reached a record high of 1,229 trillion yen in June. In August, the trading volume was slightly lower at 1,159 trillion yen.

This increase in interest in foreign currency deposits comes when the yen is trading at 24-year lows, and the Bank of Japan is trying hard to stem its decline.

Japan’s foreign reserves dropped to USD 1.238 trillion at the end of September due to the government’s dollar-selling intervention during the month to arrest a sharp decline in the yen.