Tuesday, May 23, 2017

Latest Forex Trade Sparks Controversy

More than Ten thousand small and medium-size Company in Japan have been hit by major loss on Forex derivatives, spurring the country's financial watchdog to urge Japan's leading banks, to support their customers.
The move has been met with some controversy because observers are concerned that political and regulatory pressure is forcing banks to prop up some of their weakest regional customers. The issue is a sensitive one in Japan, where some critics have complained that the government has contributed to the nation's stagnant economy by supporting weakened and troubled companies for years.
According to Tokyo Shoko Research, Japan's seafood importers and sellers of imported general merchandise are among the companies that have been hit hard by foreign-exchange derivatives losses. These companies purchased long-term foreign-exchange derivatives contracts to avoid exchange-rate fluctuation risks from 2004 to 2007, when the yen was much weaker, at more than 100 yen per dollar. 
Privately, some of Japan's banks say their clients were made fully aware of the risks involved. "Some companies must have known about the investment risk and they certainly enjoyed profits when yen was much weaker," said one bank official, adding that it is difficult to measure whether they really need to further support these companies.

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