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Forex Trading In Japan

Published by Usman Ahmed, MBA (Researcher)

Reviewed by Bowen Khong, ACCA

Forex trading refers to a systematic process of buying and selling of currencies in an over-the-counter market to make profits. The Forex market is one of the most liquid markets in the world. It undergoes a daily trading volume of around 6.6 Trillion U.S. Dollars a day. Due to its high liquidity, investors can make decent profits with forex trading. Forex trading in Japan is a very popular type of investment. In this piece, I review various aspects of forex trading in Japan. 

How Does It Work?

Forex trading involves exchange of currencies in a decentralized market. If there are chances that the price of a currency pair might appreciate in the near future, then profits can be made by buying the currency pair at current market price. Similarly, if there are chances that the underlying currency pair might lose its worth in coming days, then profits can be generated by selling it around the current price level and buying back at a cheaper price. 

Let’s try to understand the concept of forex trading with an example;

Suppose you are looking to buy U.S. Dollars with 100,000 Japanese Yen. If the current market rate for 1 U.S. Dollar is 103, then you can buy 970 U.S. Dollars with 100k JPY. 

If a price increase is expected in near future, then you can make profit by selling your 970 USD at a higher price. Similarly, if a price decrease is expected, then you can make profit by selling 970 USD at current market rate and buying back at a cheaper price. That’s how traders make money in forex trading.

Forex traders use a range of methods to predict future price direction. Some common methods of predicting future price direction include trendline analysis, fibonacci numbers, horizontal support and resistance levels and monitoring major economic events. 

Pros & Cons 

Forex trading can be an effective method to make decent earnings. Still, it might not be suitable for everyone due to high volatility and some other factors. Given below are some main pros and cons of forex trading that you should consider before making any investments.

Pros

  • More Exposure with Leverage– Leverage helps traders to gain enhanced market exposure with limited funds. With higher leverage, traders can make higher returns. Generally, regulated brokers offer leverage up to 1:30. Not to mention, increased leverage also magnifies the risk of loss. 
  • No Manipulation – There is no central authority regulating the forex market. Therefore, chances of price manipulation are minimal as opposed to equity or bond markets where insider information can make the situation worse. 
  • Low Cost – Forex trading comes with low-cost exposure. Traders only need to pay overnight swap fees along with nominal spread/commission charges. There are no overhead expenses involved. 
  • Tax Relief – In most countries, forex profits are exempt from taxes. Many investors indulge in forex trading just to save money. 
  • Accessibility – The forex market remains open five days a week. Therefore it is easily accessible round the clock. All you need is to have a working computer with a stable internet connection and a funded account to start making profits.  
  • Liquidity – The forex market is known for its increased liquidity. Traders can fill up their positions in no time. High liquidity also helps in avoiding any significant price deviation. 

Cons

  • Regulatory limitations – The non-regulated status of the forex market can sometimes become a disadvantage for traders. It usually happens when an offshore broker violates the code of conduct, leaving you helpless as you cannot file a lawsuit with a local court. 
  • Key Players Dominance – As several key players such as banks, hedge funds, and corporate clients dominate the forex market, therefore small scale traders may suffer due to fewer resources available.
  • Less residual value – Unlike bond and equity markets that allow traders to receive interest payments and dividends, forex traders can only rely on profits from currency exchange. 

How To Start Trading Forex in Japan

In Japan, regulated brokers are considered safe for forex trading because of the strict regulatory regime in place. It is easy to start forex trading in Japan as it is perfectly legal. 

Retail traders in Japan can start forex trading after fulfilling the given below requirements; 

1) Having a desktop computer, laptop, or mobile with a stable internet connection

2) Opening a trading account with a broker

3) Downloading a trading platform

4) Completing the KYC verification

All investors and traders from Japan need to fulfill the KYC requirement before depositing any money. The KYC stands for “Know Your Customer”. In addition to offering a trading platform to access the market, all brokers ask their clients to verify their identity and residential address. The process helps law enforcement agencies to control money laundering and terror financing activities. 

Traders can submit a copy of their national ID card, passport, or driving license to verify their identity. Similarly, a copy of a bank statement or utility bill can verify the address of a client.

Once the KYC verification is complete, clients can fund their accounts using any suitable payment method. Forex brokers operating in Japan offer multiple payment methods, including but not limited to credit/debit cards, e-wallets, bank transfers, and crypto payments, etc.

Forex Trading Communities, Forums, and Discussion Groups in Japan

#1 Japan Exchange Group 

The Japan Exchange Group is a well-known platform for traders from all over Japan. The group members talk about various dimensions of trading across different financial markets, including  stocks, commodities, indices, forex, and cryptos. 

#2 FOREX IN JAPAN (official)

Forex in Japan is an online forex group of traders based in Japan. There are more than 4.5K subscribers of the group on Facebook. The page has numerous posts on different forex-related topics. Its main objective is to connect Japanese Traders and help them share forex knowledge with fellow traders. 

Forex Influencers to Follow in Japan

# 1 Kei – The Japanese Forex Trader

Kie is a professional forex trader with 07 years of trading experience. With more than 23K subscribers on youtube, Kei is one of the most influential forex traders in Japan. Being a Psychology graduate, Kie educates traders on how to control their emotions while trading forex. He also runs a website where he offers forex education services. 

# 2 Felix De Vliegher

Felix De Vliegher is a professional forex trader based in Tokyo. Having experience of more than ten years, Felix is a well-known forex technical analyst. He also educates people on how to develop effective forex trading strategies. You can follow him on his Instagram channel.  He also hosts a group of forex traders from Japan on the meetup platform. 

Frequently Asked Questions (FAQs) 

Is Forex trading legal in Japan? 

Yes, forex trading is legal in Japan. The Japanese Financial Services Agency (JFSA) regulates the brokers inside the country. Traders in Japan can also trade with overseas brokers. Forex trading is a popular investment business in Japan.

What is the best time to trade forex in Japan?  

The best time to trade forex in Japan starts when the two trading sessions of the forex market overlap. Listed below are the overlap timings of different trading sessions. Please note that the timings have been converted to Japanese Standard Time. 

  1. US/London Overlap: 5:00 AM to 09:00 AM
  2. Sydney/Tokyo Overlap: 11:00 PM to 01:00 AM
  3. London/Tokyo Overlap: 12:00 AM to 01:00 AM

Is Forex Trading taxable in Japan? 

Yes, forex trading is taxable in Japan. Forex earnings exceeding the minimum taxable threshold may be subject to taxes. The tax rate on forex earnings is up to 20%. 

Can you make money trading Forex in Japan? 

Yes, you can make a steady income from forex trading in Japan. Many traders in the country are already making decent returns. However, you need to follow an effective trading strategy with proper risk management rules to remain profitable in the long run.  

Usman Ahmed, MBA (Researcher)
Usman Ahmed, MBA (Researcher)
Usman Ahmed is a currency trader and financial market analyst with more than 7 years of active trading experience. Besides holding a Masters degree in Business Administration, he has worked for some of the most renewed companies in the forex industry including FXCM, IQOption, MetaQuotes, Alpari, FXStreet, DailyFX and several others. Usman possesses strong technical analytical skills and is famous for his very own, informative and entertaining, writing style. He believes in naked chart trading analysis that is commonly known as price action trading. He follows global financial news and macro-economic events very closely.
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