DEFINITION of 'Mrs. Watanabe'

The archetypical Japanese housewife who seeks the best use of her family’s savings. Though historically risk averse, Mrs. Watanabe became a surprisingly big player in currency trading during the past decade to combat low interest rates in Japan. See also “Japanese Housewives.”

BREAKING DOWN 'Mrs. Watanabe'

The term Mrs. Watanabe connotes a family matriarch, and more broadly represents any Japanese retail investor. Culturally, smaller Japanese investors have sought safe investment options, but low interest rates since the 1990s has led many to become active in the so-called carry trade that lasted throughout the Lost Decade and Lost Score.

Japan’s Lost Decade

Japan’s Lost Decade was a period of stagnation following the country’s asset bubble collapse in the early 1990s. While the term originally referred to 1991 through 2000, the decade between 2001 and 2010 is often included as well. The entire period has now become known as the Lost Score or the Lost 20 Years.

The Lost Score led to a deflationary environment that continues to persist. Despite low interest rates, companies appear unwilling to lend money and consumers are reluctant to spend money, which exacerbates the problem.

The country has the highest debt levels as a percentage of gross domestic product in the world at over 240% thanks to its efforts to run a fiscal deficit to spur inflation. Prime Minister Shinzo Abe attempted to remedy the problem by implemented the so-called Abenomics policies, but the effects of the policies seemed to fizzle out as 2020 approaches.

What is a Carry Trade?

The carry trade is a form of speculation where investors borrow a low-cost currency like the Japanese yen and buy a high-growth currency, netting a profit. In the past, Japanese housewives accumulated Australian dollar deposits, which yielded significantly higher rates than they could achieve with Japanese yen. Carry trades may also take place with other currencies so long as the yield of the foreign currency is higher than the Japanese yen.

The Bank of Japan has actively fought currency strength by intervening in the currency markets, which had made the carry trade attractive in the past. But since the 2008 financial crisis, many developed countries have experienced low interest rate environments, which has reduced the carry trade opportunity across the board. Japan still maintains one of the lowest interest rates in the world, but the profitability of the trade has greatly diminished.

 

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