Japanese individual investors will be able to buy and sell U.S. stocks in real-time during Tokyo trading hours starting in December. Major U.S. stock exchanges are extending their trading hours to 23 hours a day, prompting large online brokerages in Japan to launch weekly trading services. This change means that Japanese stocks and U.S. stocks will compete in the same time frame. Concerns have arisen that younger investors, who are particularly interested in U.S. big tech companies, may shift away from Japanese stocks.
According to the Nihon Keizai Shimbun (Nikkei) on August 13, SBI Securities, Rakuten Securities, Monex Securities, and Matsui Securities plan to introduce trading services for U.S. stocks during the day starting December 6, when U.S. exchanges extend their trading hours. Mitsubishi UFJ e-Smart Securities is also considering a phased introduction of the service after assessing demand. The stocks available for trading will include those listed on the New York Stock Exchange and NASDAQ.
A survey of 20 major Japanese securities firms by Nikkei found that nine of the 19 responding firms either plan to introduce or are considering introducing weekly trading services for U.S. stocks. Rakuten Securities will extend its trading hours from the current 16 hours, including after-hours trading, to 23 hours. Matsui Securities will also expand its trading hours from 6 PM to 6 AM the following day to 11 AM to 10 AM the next day, based on U.S. daylight saving time. PayPay Securities, which has allowed 24-hour trading of U.S. stocks, will revamp its system to offer services starting on the first day of the new 23-hour trading.
In contrast, firms focused on face-to-face sales are more cautious. Only three firms—Okasan, Tokai Tokyo, and Mito Securities—indicated they are considering introducing the service. SMBC Nikko Securities and Ichiyoshi Securities stated they currently have no plans to implement it, while Nomura, Daiwa, and Mizuho Securities are still evaluating whether to proceed. Extending trading hours would require significant changes to core IT systems and adjustments in staff allocation. Since many customers are institutional investors, it is difficult to predict whether the costs incurred will yield sufficient returns.
The expansion of services by Japanese brokerages has been made possible by the significant extension of night trading hours on major U.S. exchanges. Currently, the regular trading hours for U.S. markets are from 9:30 AM to 4 PM Eastern Time. This is supplemented by pre-market trading (from 4 AM) and after-hours trading (until 8 PM), totaling 16 hours, which translates to 6 PM to 10 AM the following day in Japan. The remaining eight hours, which correspond to midnight in the U.S. and daytime in Asia, have seen major exchanges closed. Starting December 6, this gap will be filled with night trading, allowing for 23 hours of trading, excluding one hour for system maintenance. In Japan, this will mean trading from 11 AM to 10 AM the next day. However, there are concerns that lower liquidity during night trading could lead to greater price volatility.
In South Korea, weekly trading of U.S. stocks has already become commonplace. Eighteen domestic brokerages offer services that allow investors to buy and sell U.S. stocks during daytime hours in Korea through alternative trading systems. Japanese brokerages are thus entering the weekly trading market later than their South Korean counterparts. However, the difference lies in the fact that Japan's service expansion is directly tied to the U.S. exchanges extending their trading hours.
Nikkei pointed out that the extension of trading hours could lead to an outflow of individual funds from the Japanese stock market. Until now, Japanese individual investors have divided their trading between Japanese stocks during Tokyo's daytime hours and U.S. stocks during the nighttime hours when U.S. markets are open. In the future, they will be able to invest in U.S. stocks like NVIDIA and Apple while trading Toyota and Sony in real-time. Yuji Gusunoki, president of Rakuten Securities, predicted that once 23-hour trading begins, "some young investors who have been investing in Japanese stocks will shift to U.S. stocks."
Even before the introduction of 23-hour trading, the volume of overseas stock trading by Japanese individual investors has been rapidly increasing. According to the Japanese Ministry of Finance, the trading volume of overseas stocks through investment trusts reached 77 trillion yen (approximately $686 billion) last year, nearly double that of five years ago. The popularity of funds that diversify investments across global stocks has contributed to this increase. While the Japanese government is promoting individual investment through the introduction of the new NISA (small investment tax exemption system) in 2024, some of the funds attracted by this system are flowing into overseas assets like U.S. stocks.
The allure of the U.S. stock market is also growing. In June, Japanese investors flocked to the IPO of SpaceX on NASDAQ, and upcoming IPOs of major tech companies like OpenAI are also anticipated.
Trading conditions for Japanese stocks are less favorable. U.S. stocks can be purchased in single shares, while Japanese stocks are typically sold in units of 100 shares, requiring a significant investment for high-priced stocks. The trading hours for the Tokyo Stock Exchange are also limited to 5 hours and 30 minutes, from 9 AM to 3:30 PM, excluding lunch breaks. Whether the Tokyo Stock Exchange will improve this trading environment remains to be seen. The decision by smartphone payment company PayPay to choose NASDAQ over the Tokyo Stock Exchange for its listing in March has raised concerns about the competitiveness of Japan's capital markets.
Nikkei warned that if the 23-hour trading of U.S. stocks exacerbates the hollowing out of Japan's capital market, it could counteract the Japanese government's "asset management nation" policy, which aims to channel household savings into the investment market to grow Japanese companies and capital markets. As Japanese companies will need to compete for individual investors' choices against U.S. firms in the same time zone, the differentiation between Japanese stocks will likely become more pronounced.
* This article has been translated by AI.
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