How to Start Forex Trading in Japan

Forex trading has gained remarkable popularity in Japan, with the country ranking among the largest retail forex trading markets in the world. Known for its tech-savvy population and strong financial awareness, Japan has seen a surge in forex traders drawn to the flexibility, accessibility, and potential profitability of forex trading. Many Japanese traders are particularly active in trading currency pairs like USD/JPY, reflecting the market’s global influence and local relevance.

With a robust regulatory framework managed by the Financial Services Agency (FSA), forex trading in Japan offers a secure environment for individuals looking to enter the market. This guide will explore the basics of forex trading, along with tips and resources tailored to Japan's unique trading landscape.

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How to Get Started with Forex in Japan

Before you trade forex, you’ll need to open a brokerage account to access all financial markets. As a trader in Japan, you’ll have your choice from a wide range of international and domestic brokers. Here’s how to get started opening, setting up and funding your first account. International investors might want to access the Japanese economy, and Japanese investors can look into trading against the yen or other international currencies.

• Test Your Internet Connection: The first thing you’ll need to trade forex is a stable internet connection. Run a speed test on your phone or computer to ensure that you have the reliable connection you need to trade.
• Choose a Broker: You cannot buy and sell currencies directly. Instead, you’ll work through a licensed broker who executes trades on your behalf. When you compare brokers available to you, be sure to consider fees, services, supported trading platforms and currencies available. Once you find a broker that offers what you need, create an account.
• Select a Trading Platform: Though many brokers offer their own proprietary trading platform, you might want to use a 3rd-party platform like MetaTrader 4 or MetaTrader 5 for improved functionality.
• Fund Your Account: After you open your account, you need to deposit funds to trade with. Most Japanese traders do this by linking their bank account or by depositing funds via a debit or credit card.
• Start Trading: Once your account is open and fully funded, you can place your order. 

Featured Forex Brokers in Japan

Forex brokers in Japan are highly regulated — and there are many reliable and safe forex brokers offering accounts to Japanese residents. If you aren’t sure where to open an account, be sure to consider a few of our favorite brokers below. 

Japan Forex Trading Strategies

There are two major types of trading strategies that forex traders use to decide which currencies to buy and sell: fundamental analysis and technical analysis. Let’s take a look at some of the differences between the two and how you can decide which method is right for you. Remember, you’re analyzing both what central banks are doing to manage their currencies and what investors are doing to profit from these currencies.

Fundamental Analysis

Traders who use fundamental analysis as their primary trading strategy evaluate the countries that use the currencies they invest in. Fundamental analysis involves looking at political and economic indicators, such as:

• GDP reports
• Unemployment rates
• Non-farm payrolls
• Scheduled news events
• Government spending reports
• Consumer confidence reports
• Net spending data

Traders who use fundamental analysis as their primary trading strategy typically take a long-term or mid-term approach to currency trading. Though fundamental analysis doesn’t require advanced charting software, you must have access to an unbiased source for world news. You must also know how to interpret international economic and political data, such as interest rate and foreign exchange rate.

Technical Analysis

Traders who use technical analysis as their primary trading strategy doesn’t usually do much research into the economic health of the countries who use the currencies they trade. Instead, technical analysis traders look at charting patterns and past economic data to predict which currencies will rise in value relative to one another.

Some indicators that traders who use technical analysis may look for when deciding which currencies to buy may include:

• Reversal candles that indicate a changing trend
• Breakout candles that indicate a sudden value change
• Resistance and support levels that indicate buy or sell signals

Technical analysis traders need reliable trading software that allows them to chart data and trend lines. Most traders who use technical analysis as their primary trading strategy use a short-term or mid-term trading window before selling their currencies. 

Forex Trading Example in Japan

Let’s take a look at an example of how you might earn money trading forex in Japan by converting your currencies at strategic times.

Imagine that you have 100,000 yen to invest and you believe that the USD will soon rise in value in relation to the yen. Your broker offers you 10:1 leverage for your investment, which means that you can invest with the power of 1 million yen despite only having 100,000 yen in your account. The conversion rate from USD to JPY is currently 1 dollar for every 107 yen. You convert your entire lot of yen and your leverage and are left with $9,345.

Soon, you see that the value of the dollar is rising in relation to the yen. When you decide to sell your dollars, 1 dollar is equal to 110 yen. You convert your entire lot and leverage back to JPY and are left with 1,027,950. Once you return the leverage you borrowed, you profited by a total of 27,950 yen on this trade. 

Forex Terminology

When you trade forex, you might notice that the realm of currency trading has its own unique “language” that traders and brokers use. Familiarize yourself with some of the most common terms below.

• Pip: A pip is the smallest unit of any currency. In most cases, currencies are calculated to the 4th decimal place — the only exception is the Japanese yen, which is rounded to the 2nd decimal place. If the yen increases in value from 120.11 to 120.21 in relation to the USD, we’d say that the value of the yen moved by 10 pips.
• Lot Size: Your lot size is the total number of units of currency you’re buying or selling. For example, if you sell 100,000 JPY, your lot size is equal to 100,000.
• Orders: An order is a request you make to your broker to buy or sell a currency on your behalf. There are many different types of orders, and you can use multiple order types to limit your losses and maximize profits.
• Calls: If your equity dips below a certain percentage, your broker might subject you to a margin call. If you receive a margin call, you’ll be required to deposit more money into your trading account to maintain your position. Margin calls are a major risk of using leverage and can quickly wipe out your profits if you aren’t careful. 

Preparing to Enter the Forex Market

Getting started trading forex begins with a solid educational background. Don’t be afraid to take plenty of time researching brokers and brokerage options before you choose where to open an account. Just a bit of research can end up saving you thousands in the form of decreased commission or savings on trading tools.  

Frequently Asked Questions