TOKYO, March 12 (Reuters) - Japanese investors are

borrowing heavily to buy domestic shares, and the quantum of

shares purchased using such leverage is at its highest in seven

months.

Margin trading, which involves using borrowed cash from

brokerages to boost bets in the stock market, is popular among

retail investors and shows how bullish they are on the market.

BY THE NUMBERS

The value of shares bought on margin reached 4.7 trillion

yen ($32 billion) in the week ended February 28, up from 4.5

trillion yen the previous week, according to Japan Exchange

Group ( OSCUF ) which runs the Tokyo Stock Exchange.

Margin trading comprised about 55% of retail trading value

that week.

That is close to a 4.98 trillion yen peak in July 2024, and

approaching the record amount of 5.98 trillion yen in February

2006.

WHY IT'S IMPORTANT

A large amount of shares bought on margin leaves the Nikkei

share average susceptible to sharp falls because retail

traders will be forced to dump stocks if the value of their cash

margin drops during a market decline.

The Nikkei fell more than 2% on Tuesday to hit its

lowest since September 17, dragged by sharp losses on Wall

Street.

Shigetoshi Kamada, general manager at the research

department of Tachibana Securities said Tuesday's sharp loss was

caused by the leveraged investors' offloading their positions.

It was similar last year as the Nikkei plunged more than 10%

in August in its biggest single-day fall since the 1987 Black

Monday crash and the value of shares bought on margin fell

sharply.

What could, however, cushion the impact this time is bids

from companies buying back their shares. Kamada estimates

Japanese firms have set aside some 2.5 trillion yen to buy back

shares from January to March this year.