Japanese retail foreign currency deposits have jumped this year as local investors switch out of a weakening yen and zero-yielding local bond markets and into overseas markets with rising yields.
Bank of Japan data shows foreign currency deposits at domestic banks surged to 26.58 trillion yen ($182.38 billion) at the end of August, an 8.3% rise since the start of the year.
That increase in deposits in the first eight months of this year was the highest since 2015, the data showed.
Spreads between Japan's 10-year government bonds and U.S. Treasuries are near 4 percentage points. The value of long dollar positions retail investors held at the end of July was 3.07 trillion yen, the biggest since January 2015.
Analysts expect a further rise in foreign currency deposits, given the yen's extended weakness and as Japanese investors look for ways to deploy idle assets. Households held a record 1,102 trillion yen in cash and deposits at the end of June.
This rise in interest in foreign currency deposits comes at a time when the yen is trading at 24-year lows, and the BOJ is trying hard to stem its decline.
Japan's foreign reserves fell to $1.238 trillion at the end of September as a result of the government's dollar-selling intervention during the month to arrest a sharp decline in the yen, Ministry of Finance data showed on Friday.
"The lack of any conspicuous profit-taking along with the sustained rise in deposits even as the yen has dropped in value arguably indicates anew that the preference for foreign currency deposits remains firm in the face of the widening spread between domestic and foreign yields," said Barclays' Sharavdemberel.
