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Day Trading Gains Converts Among Japanese Investors

April 14, 2006|From the Associated Press

FUJISAWA, Japan — When Takao Uchida's plan to launch his own business fell through three years ago, he knew right away how to use his 2.5 million yen ($21,550) in savings. He bought stocks.

Uchida has doubled his money since then. The 29-year-old recently quit a job as a computer engineer to become a full-time day trader and now heads a company to provide support for hundreds of others like him.

"Sometimes I get so carried away, I end up skipping lunch. But I have more freedom than working in the office," Uchida said while watching numbers blink on a pair of computer screens in his tiny apartment near Tokyo. "I'd much rather take on the risk than endure a rigid corporate structure."

For decades, Japanese looked at stock trading as a form of risky gambling, but no longer. Interest in the market is booming, with workers checking their stocks during lunch breaks and housewives placing orders from home computers. Enthusiasts like Uchida have even become professional day traders, following a risky investment strategy in which stocks are bought and sold rapidly in an effort to profit from usually small price moves.

Day trading gained a less-than-stellar reputation in the United States during the late 1990s, when thousands of novice investors took up the practice in an effort to cash in on the bull market. Because of high trading costs, many found that they couldn't make money even during good times. And when the market headed south, day trading fell from favor -- although it has picked up in recent years as U.S. markets have rebounded.

In Japan, the number of individual stock investors surpassed 35 million for the first time last year, according to the Tokyo Stock Exchange, up from 27 million in 1995. And they've made out well. Buoyed by strong earnings, Japan's benchmark Nikkei 225 index surged 40% in 2005.

The trend has spawned a stream of trading guidebooks with titles such as "The World's Simplest Book of Stocks" and "Day Trading: This is How to Make Money" taking over large sections of business and investment shelves at bookstores.

Investment clubs are mushrooming, and brokerages and consulting companies regularly organize seminars. Hundreds of blogs by amateur traders detail stock performance and tips.

Analysts say most are online traders who usually place dozens of small lot orders, which have driven up trading volume and volatility in recent years.

The day trading boom comes amid a general surge in interest in the stock market. The number of accounts at 56 Japanese Internet brokerages surpassed 7.9 million in September, up from 296,941 in 1999, when the nation's first such brokerage emerged, according to the Japan Securities Dealers Assn. About 5% of those accounts are believed to belong to day traders.

Sadakazu Osaki, executive fellow at Nomura Research Institute of Capital Market, says market deregulation in recent years, the approval of small-lot trading and the popularity of Internet brokerages has encouraged many Japanese to buy stocks.

The trend is not without its detractors. Critics often describe day traders to anti-social computer geeks who seek easy profits by just typing numbers on their keyboards rather than through honest work.

In a recent article in the national newspaper Asahi, Hideo Kumano, chief economist at Dai-ichi Life Research Institute, suggested that day traders might be fooling themselves.

"Those who dream of becoming billionaires," he said, "don't imagine successful investment takes experience and mental toughness."

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