Yen’s slump revitalizes commodities trading in Tokyo

Trades by foreign investors surged 16 percent

A slump in the yen against the dollar has lured enough overseas investors back to the Tokyo Commodity Exchange to raise the prospects for its first profit in six years, the president said.

“We expect to book profits as early as next fiscal year,” Tadashi Ezaki, president of the largest Japanese raw-material bourse, said in an interview in Tokyo yesterday. “A weakening yen raised the value of commodities denominated in the currency, boosting participants in our market.”

Contracts traded by foreign investors surged 16 percent from January’s record to a new high of 1.92 million in February as the yen depreciated 8 percent against the dollar this year. Gold futures, the most-actively traded commodity on the bourse, jumped 31 percent to 1.34 million contracts in February from a year earlier as the price rallied to a record while bullion in dollars dropped 4.7 percent in 2013.

Ezaki, 71, said foreign investors now account for more than 30 percent of trading on Tocom, as the bourse is known, compared with 10 percent in 2010. The volume they’ve brought back to the market -- which slid to a low of 25.5 million contracts last year from a peak of 87.3 million in 2003 -- is also helping lure back local trading, he said.

The yen reached a 3-1/2 year low of 96.71 per dollar on March 12 as traders bet that the government of Prime Minister Shinzo Abe and the Bank of Japan will add to stimulus measures in a bid to end deflation. New central bank governor Haruhiko Kuroda pledged yesterday to continue easing until a 2 percent inflation target is reached.

Tocom Earnings

Tocom posted a 387 million yen ($4.1 million) operating loss in the six months ended Sept. 30, which put it on course for a fifth straight year of unprofitability. In the six months since then, Abe became prime minister, Kuroda was appointed to lead the Bank of Japan and the yen weakened 17 percent. Ezaki declined to comment on the bourse’s earnings for the second half of the current fiscal year through March 31.

Gold futures on Tocom rallied to a record 5,081 yen a gram on Feb. 7, while bullion in dollars has fallen 17 percent from its 2011 record.

Volume of rubber futures on the bourse, the global benchmark, expanded 6 percent to 410,644 lots in the first two months of 2013. The price climbed to an 11-month high of 337.8 yen a kilogram on Feb. 6. A weak yen boosted costs to import rubber from Thailand, the largest exporter, raising the yen- based prices of the commodity used in tires.

Tocom took over trading of corn, soybeans, raw sugar and azuki beans from the Tokyo Grain Exchange in February as the second-biggest commodity bourse will be dissolved because of losses and low liquidity. Tocom also trades silver, platinum, palladium, gasoline, kerosene, gas oil and crude oil.

Three Exchanges

The bourse accounted for 93 percent of the total trading volume of the three Japanese raw-material bourses in 2012. It will control 99 percent this year, with Kansai Commodities Exchange in Osaka, which mainly trades rice, handling the remainder.

Tocom continues to talk with overseas competitors including CME Group Inc. about the possibility of alliances to integrate trading systems and attract more participants, Ezaki said. The exchange aims to make a decision about any alliances sometime in the second half, he said.

Tocom, once the world’s largest commodities bourse after the New York Mercantile Exchange, retreated to the 12th biggest in terms of contracts volume in 2012 after a government crackdown to protect individual investors from losses reduced trading. It has been surpassed by China’s Shanghai and Dalian exchanges and India’s Multi Commodity Exchange.

Ezaki said Tocom is lobbying government and investment associations to change rules that prohibit or restrict individuals, pension funds and trusts from investing in commodities.

The biggest shareholders of Tocom, which is not listed, include Mitsubishi Corp., Nihon Unicom Inc., Yutaka Shoji, Sumitomo Corp., Nikkei Inc., Nomura Holdings Inc. and Mizuho Capital Co., according to a regulatory filing as of March 31.

Bloomberg News

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