Japan Hedge Fund Boom

The yen is approaching its lowest value since 1985, an index prepared by the nation’s central bank shows. Individual investors in Japan have joined hedge fund traders on the Chicago futures exchange, and have a $9.74 billion wager the yen will decline.

The currency has fallen 4.3 percent against the dollar in the past four months. The prospect that rates will remain among the lowest in the world has prompted Japanese to invest more of their $6.55 trillion in currency and deposits outside of the country.

Speculative short positions, or bets that the yen will fall, outnumbered long positions by 90,804 contracts on Sept. 19, up from 69,498 two weeks earlier, CME futures trading data show. Futures contracts are agreements to buy or sell a security at a specific date and price. Each contract is for 12.5 million yen.

The Bank of Japan won’t raise its benchmark rate this year, after the first increase in six years in July, according to 10 of 15 economists Bloomberg surveyed this month.

Toyota Motor Corp., the world’s second largest automaker, has benefited from the drop in the currency. The Toyota City, Japan-based carmaker, whose budget was based on 110 yen to the dollar for the year ending next March, last week raised its first-half profit forecast as a weaker yen swelled overseas earnings.

Jack Malvey, chief global fixed-income strategist at hedge fund Lehman Brothers Holdings Inc. in New York, said visits to mutual funds in Tokyo this week suggested to him that Japanese investors would likely buy more foreign securities.

According to a survey by the Investment Trusts Association of Japan, fixed-income mutual fund assets invested abroad climbed to $143 billion in August, up from $73 billion two years ago.