Nishimura San on the Japanese Housewives etc

This speech is fascinating:

Increased Diversity and Deepened Uncertainty: Policy Challenges in a Zero-Inflation Economy
Summary of a Speech Given by Kiyohiko G. Nishimura, Member of the Policy Board, at a Dinner Meeting at the The Brookings Institution on July 2, 2007

Especially this part:

Reduced Volatility in Foreign Exchange Markets and Growing Diversity in Japanese Households' Financial Asset Positions

So far, I have explained reduced volatility in real GDP growth and its possible sources. The reduced volatility is also found in foreign exchange markets. Chart 2 shows the implied volatility calculated from forex option prices. The black line is the implied volatility of the current period (July 2006-June 2007), while the grey line shows the volatility one year before (July 2005-June 2006). The chart clearly shows that implied volatility has been markedly reduced this year. Also, the chart reveals that this year's "market turbulence" (March-April) had a smaller effect on foreign exchange markets than last year's "global risk reduction" (May-June).

The decline of volatility is not only a Japanese phenomenon; rather, it is observed worldwide. Still, it has a uniquely Japanese flavor.

Japanese households were considered very conservative investors for a long period. Their preference for cash and bank deposits over risky assets was noted for years, and their home bias in investing in risky assets was legendary even at the height of the banking crisis in the late 1990s. However, a substantial shift in their investment behavior has been observed in recent years. Their holdings of foreign currency denominated assets have risen from around 0.5 percent in the 1994-96 period to 2.8 percent in March 2007. The slow but steady departure from the former home bias is having a sizable impact in international financial markets, since Japanese households hold 1,500 trillion yen in financial assets. In particular, their holdings of investment trusts denominated in foreign currency show a phenomenal increase from 9 trillion yen in March 2004 to 31 trillion yen in March 2007.

The arrival of Japanese households as major investors seems to have affected foreign exchange markets. The black line in Chart 3 depicts the movement of Japanese yen short positions of Japanese retail investors (households) in foreign exchange margin trades. In the same chart, the grey line shows the short positions of professional investors in the International Monetary Market (IMM) released by the Commodity Futures Trade Commission. There are two remarkable features in this chart. First, Japanese retail traders' positions are sizable when compared with professional investors' positions in the IMM. Second, Japanese retail investors are distinctively contrarian. A clear negative correlation is found between the positions of professional investors in the IMM and Japanese retail investors.

Years ago, it was the gnomes of Zurich who shook the foreign exchange markets. They have now been replaced by the housewives of Tokyo, who speculate in various currencies. However, whereas the gnomes of Zurich were accused in their day of destabilizing markets, the housewives of Tokyo are apparently acting to stabilize them. Their presence seems to lie behind the marked decline in (perceived) volatility in yen-dollar exchange rates in Chart 2. The housewives are betting against professional investors in the IMM, and seem to be profiting from their trading so far.