Put your yen to work with the language of investing

While the human toll of the COVID-19 pandemic in Japan has differed dramatically from that in the United States, the two countries have followed similar patterns over the past year: an initial outbreak followed by summer and winter waves of increasing intensity, and economic markets that bottomed out in March 2020 only to come roaring back.

The Nikkei is particularly notable given the 停滞 (teitai, stagnation) trend over the past 30 years. On Feb. 15, the 終値 (owarine, closing price) finished above ¥30,000 for the first time since August 1990, leading to a nearly identical headline in every major newspaper in Japan: 3万円台回復 (Sanman-en dai kaifuku, literally: return to ¥30,000 level).

The response to stay-at-home advisories, job losses and 市場ボラティリティ (shijō boratiriti, market volatility) has also been the same in both countries: Record numbers of 個人投資家 (kojin tōshika, individual investors) are taking advantage of online investing platforms to try their luck with the markets.

In 2020, new customers started 1.3 million accounts at Rakuten Securities and more than 800,000 at SBI Securities, both nearly double the number of new accounts in 2019, and in the U.S. the trendy investing app Robinhood added a record 3 million new users in the first four months of the year alone.

The language of investing in Japanese shows that basic investing strategies are being used in Japan but that there are some unique elements that have developed.

Investors should aim for 分散投資 (bunsan tōshi, diversified investments) held in a tax-advantaged 確定拠出年金 (kakutei kyoshutsu nenkin, defined-contribution pension) account and should plan to hold for the long term: 含み益 (fukumi-eki, paper/unrealized gains) and 含み損 (fukumi-son, paper/unrealized losses) aren’t permanent until securities are sold, so it’s critical to be cautious when thinking of 利益確定 (rieki kakutei, locking in profits). As with many four-character compounds, this one is often shortened to the first two characters of each word: 利確 (rikaku).

Many Wall Street investing adages have been translated directly into Japanese. These include basic logic like 麦わら帽子は冬に買え (mugiwara bōshi wa fuyu ni kae, buy straw hats in winter), advising investors to buy when demand is low and sell when demand is high, and 5月に売り逃げろ (go-gatsu ni urinigero, sell in May and go away), an investment strategy also known as the ハロウィーン効果 (harowīn kōka, Halloween effect) that seeks to take advantage of historically stronger stock market growth from November to April.

Japanese has some English-derived terminology that is dying out in the original as well as some 和製英語 (wasei Eigo, English invented in Japan).

バガー (bagā, bagger), for example, is a method of calculating stock returns as a multiple of the original investment. “Ten bagger” is a stock that returns 10 times the original investment. Peter Lynch coined the term in 1988, and though usage is becoming less common in English, it’s relatively standard to see something like 27バガー on Japanese Twitter for a stock that has returned 27 times the original investment.

This is further confirmed by the fact that “10 bagger,” in quotation marks, finds tens of thousands of Google search results, while “テンバガー” (tenbagā, 10 bagger) brings up search results in the hundreds of thousands.

There are also terms like ジャンピングキャッチ (janpingu kyatcchi), which is derived from the English words “jumping catch.” This phenomenon is when an investor buys a rising stock near highs only to have it drop in value. The term does not exist in English, although it sounds somewhat similar to the adage “Never try to catch a falling knife,” which is an attempt to buy into a position at a low that just keeps getting lower.

“Jumping catch” and “bagger” are specialist terms used mostly by investing enthusiasts, the kind on the hunt for 大化け株 (ōbake kabu, literally: transformed stocks), cheap stocks that suddenly skyrocket in value.

These stocks are not dissimilar to GameStop and others pumped by the Reddit message board r/WallStreetBets in the U.S. earlier this year. Interest in this mania in Japan was muted. Reporting from Bloomberg Japan suggests that Japanese investors’ limitations with English prevented them from being part of the story.

Traditionally, Japanese investors have been known for trading currency and have been more conservative with investments. An August 2020 survey by the Bank of Japan showed that 54% of Japanese household finances were in cash and savings and only 14% in securities. The U.S. was almost the opposite, with 14%in cash and savings, and 51% in securities.

There are unique incentives for stockholders in Japan, namely 株主優待 (kabunushi yūtai, shareholder benefits). These are gifts given to people in Japan who own the stock of certain companies on the 権利確定日 (kenri kakuteibi, day of rights allotment). These gifts are given out twice a year and can be in any form and of any value. Not all stocks offer these gifts; about 1,500 companies representing around 40% of publicly trading companies offer these programs.

Frequently these are items the company produces, but they can also be gift cards or even food or bags of rice. Unlike 配当金 (haitō-kin, dividends), 優待 (yūtai) — which translates as “hospitality” but is used for the gifts — are tax exempt. This can effectively increase the yield on a stock by as much as several percent, and 優待 enthusiast Hiroto Kiritani has become an evangelist for the benefit.

Kiritani, a former shogi player, lost a significant amount of his net worth during the 2008 financial crisis but managed to get by on the gifts from companies. He now encourages investors to hold a diversified set of stocks that offer 優待. Some companies even offer 優待 that grow larger each year the shareholders hold them, and there are hundreds of websites that provide recommendations for 優待 to take advantage of.

Japan has had a remarkable 30-year stretch despite the struggles of its stock market. It has radically increased its cultural influence and drawn hundreds of millions of tourists.

Yet somehow at this moment of global crisis when the country is gearing up to host a pared down Olympics and entry to Japan is heavily regulated, the stock market has finally recovered its gains.

In the words of investing and finance writer Ben Carlson, “The stock market isn’t always right, but it is amazing how much it’s right more often than it’s wrong.” The market is pricing in optimism for Japan’s future, which makes this a worthwhile time to study up on the language so you can put your money to work.

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