Forex Marketing in Japan

Japan is an island country in East Asia. It is located in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north toward the East China Sea and Taiwan in the south. Despite all being a relatively small country, Japans capital, Tokyo, is home to 36 million hard-working citizens, making it the largest Capital in the world.

Japan, one of the worlds most literate and technically developed, Can you imagine a world without karaoke, the Gameboy, or a Prius？ Although Japan is densely populated, the Japanese have one of the highest standards of living, while acquiring the highest life expectancy in the world at the same time.

Additionally, did you know that the Japanese characters that comprise Japans name (日本) literally mean “origin of the sun” and that Japan is all the time refreshing to as the “Land of the Rising Sun”？

Facts, Figures, and Features about Japan

• Neighbors: Russia, Korea, China

• Size: 145,925 square miles

• Population: 126,659,683 (10th)

• Density: 873.1 people per square mile

• Capital City: Tokyo (population 13,189,000)

• Head of State: Emperor Akihito

• Head of Government: Prime Minister Yoshi hide Suga

• Currency: Japanese Yen (JPY)

• Main Imports: Petroleum, liquid natural gas, clothing, semiconductors, coal, audio, and visual equipment.

• Main Exports: Motor vehicles, semiconductors, iron and steel products, with auto parts, Suzuki Ichiro, Sony PlayStation, Samurai swords, Mr. Miyagi

• Imports Partners: China 21.3%, U.S. 8.8%, Australia 6.4%, Saudi Arabia 6.2%, UAE 5%, South Korea 4.6%, Qatar 4%

• Exports Partners: China 18.1%, U.S. 17.8%, South Korea 7.7%, Thailand 5.5%, Hong Kong 5.1%

• Time Zone: GMT +09

• Website: https://www.japan.go.jp/

Economic Overview

Apart from being the video game capital of the world, Japans economy is rated to be the third-largest in the world. After the end of World War II, Japan has been on a rampage, experiencing rapid economic growth, despite that the country is mountainous and volcanic. But Because of the laws of nature, this limits the growth of natural resources in Japan. To counterfeit for this lack of resources, the Japanese economy has become very export-dependent, with exports amounting to more than $694billion in 2017!

It doesn't only make up the 14% of the country‘s output, but it’s also the sixth-largest in the world. Currently, Japan has been riding the cocktails in the vast and rapid growth China. With Japan being the nearest major economy, Chinese demand has led to massive shopping sprees of Japanese products. Japan is a home to one of the worlds biggest financial centers – Tokyo! Plus the availability of great food (how can you beat tempura and sushi？!),

Also You can witness how Japanese businessmen take business seriously even on movies With so much money flowing in and out of Tokyo every day, traders and investors can use Japan as a proxy for whats happening in the Far East.

Monetary & Fiscal Policy

As the Bank of Japan (BOJ) has been around since the late 1800s, only not long ago did the BOJ gain independence from the Ministry of Finance (MoF). It was only in 1998 that the Japanese government passed laws giving the BOJ control over financial policy. Notice that the Ministry of Finance (MoF) still pursue to take charge of foreign exchange law, which has led to tension and continuous differences between the two. Usually, the government and the central bank doesn't just rely on each other – one should not have att all effect over others. This is not the matter for Japan. Although the BOJ has gained independence from the government, there is a question of who really “wears the pants”.

The MoF has kept a watchful eye on the BOJ, pressuring it to pass policies that would help the yen hit the MoFs foreign exchange targets.

Similar to other central banks, the BOJs main aim is that of price stability. The ninja bankers at the BOJ make use of open market operations and interest rate of changes to meet their goals. One thing you should know about the BOJ is that for a very, very long time, they have kept rates at low levels, with the current rate sitting between 0.00% to 0.10%. Because the rate is already so low, the central bank cannot decrease the rate to stimulate growth or create liquidity.

For example, in its attempt to fight deflation, the BOJ has whipped out its shurikens and has flooded the markets with money through unorthodox quantitative easing measures. Quantitative easing measures are moves made by central banks in order to increase liquidity and money grant through the purchase of government securities. It is sometimes called “printing money” because the central bank literally creates new money from thin air in order to buy back their government securities.

In theory, the BOJ believes that the increase in the money supply lead to an increase in lending and spending. Over the years, Japan has created liquidity in the markets by flooding the economy with several programs that let the BOJ buy or sell Japanese government bonds and bills.

Getting to Know the JPY

The yen is so hardcore that it didnt want to be named anything else. It came into the foreign exchange market called the yen and up to now, it is still called the yen.

The yen is the yen is the yen.

It is also bind in currency crosses, especially against the EUR, GBP, and AUD.

Traders love me like the Japanese love their sushi.

After the USD and the EUR, the JPY is the most heavily traded currency, with USD/JPY being rated as the 2nd most traded currency pair. Because of the role that Japan plays in international trade, there is a need for the JPY in order to complete international transactions.

Are you ready for the Asian Sensation？

When investors think of Asia, they subconsciously think of Japan. With Tokyo being one of the world‘s major financial centers, Japan is often representative of what’s happening in Asia.

Japan is overall a major trading partner of other Asian powers. If businesses are moving very well in Asia, this is usually reflected by the Nikkei, the major stock exchange in Tokyo.

Im always on the go

With Japanese reports coming out during the Asian session, it is only natural that the yen trading is active during the Asian session (0:00 GMT). The yen can be active in other sessions depending on what economic data is released. This should be expected – it is part of Japanese culture, they do business around the clock!

but Im all for cheap thrills!

With many investors looking for the most bang for their buck, some have resorted to carry trade.

With the JPY having the least rate of interest between the majors, it is mostly used in carry trade as a funding source.

The Japanese tend to think alike.

Japanese asset managers tend to make the same investment decisions. This leads to highly correlated positions, which means that it is possible to see trends develop.

Im prone to breakouts

One behavior of yen pairs is their ability to merge for quite some time, then break out in one direction, then mearge once again, then break out again! ...Keep your eyes and ears ready because you never know when this might occur!

and I have a love-hate relationship with China

With China raising quick as a major power in the world, its influence on the JPY will continue to grow. If signs continue to further growth in the Chinese economy, it may affect demand for the JPY.

How is that possible ？

As mentioned earlier, China is one of Japans major allies in terms on trading. Naturally, when the Chinese businesses boom, they will need to order more from Japan. This, in turn, would increase demand for the JPY, causing it to increase.

Important Economic Indicators for the JPY

• Gross Domestic Product – This measures the economic projects of Japan. It highlights either the economy is red hot like lava from Mt. Fuji, or if its in the process of harakiri.

• Tankan Surveys – These reports survey managers from a wide scope of industries, questioning them on their views of the economy. Elevating views(scores above 0.0) shows that Japanese businessmen expect business activity to pick up. Scores below 0.0 suggest otherwise.

• Trade Balance – The Japanese economy is heavily export-dependent. Falling export numbers could lead to a decline in economic projects.

• Unemployment Rate – This measures the rate of unemployment in Japan. High unemployment could lead to a decline in consumer spending – how would they be able to afford their video games and anime？

• Consumer Price Index (CPI) – In the past, the Bank of Japan has shown that they are not afraid to make moves to fight off deflation. If trends show that prices of samurai swords and shurikens continue to fall, it may lead to some surprise moves by the BOJ.

• Core Machinery Orders – A large chunk of Japans exports are agreed of machinery orders. The rise or fall in core machinery orders could reflect the current status of Japanese trade.

What Moves the JPY

Investment Moves

As a results of its low interest rates, the JPY has been considered a good funding source for investments in other countries. This means that if traders and investors are scared, they will begin to unroll their positions in higher-resulting benefits. The moment traders start unrolling these dangerous positions (carry trades), they have to cover their short JPY trades by buying back the currency.

The BOJ effect

This doesn‘t mentioned those announced, scheduled effects. I’m talking about currency intervention! The BOJ and MoF keep special attention to the FX markets. With the Japanese economy being very export-dependent, the value of the yen plays a key role in trade.

The BOJ doesnt want the JPY to rise higher because it would make Japanese exports relatively more expensive. By keeping the value of the JPY lower, they can stimulate demand for Japanese products, which in turn, would benefit the economy.

Trading USD/JPY

USD/JPY is traded in amounts denominated by the base currency, the US Dollar. Standard lot sizes are 100,000 units of USD and mini lot sizes are 10,000 units. Many brokers now provide tailored lot sizes to as low as 1 unit.

The change in the pairs value is denominated by the counter currency, the Japanese yen. Take note, for yen pairs, it is the 0.01 decimal place. So, a change in the value of USD/JPY from 95.00 to 95.01 is a move of 1 pip. As with all currency pair, the change in value is denominated by the counter currency.

The profit and loss are calculated in Japanese yen and then converted to the currency your trading account is based in. For one standard lot position size, each pip movement is worth 1,000 JPY.

For one mini lot position size, each pip movement is worth 100 JPY. Let's say, the recent rate of exchange for /JPY is 95.00 and you want to trade one standard lot, then one pip would equate to 10.52 USD (see our Pips and Pipettes lesson on how to calculate pip values). Margin calculations are based on U.S. dollars. Consider a case with leverage of 100:1, 1,000 USD is what is expected to be kept apart in the account for you to trade 100,000 USD/JPY.

USD/JPY Trading Tactics

USD/JPY tends to follow short to medium-term trends, which could last a few days. If you are maintaining a swing trade, that is holding a trade for more than a day, you can try to enter on retracements. The moment price begins to consolidate, you can close your position, and wait for another trend to develop. Take note that when price breaks out, it is possible that you will see a sustained move by the time traders jump back in on the trend.

Also the next thing to remember is that Japanese industrial companies usually set their orders at round figures, like 100.00 or 90.50.

You should keep track of whenever the price is near these pictures, because can serve as provisional support and resistance levels.

Lastly, you should focus your

lso eye out for other yen pairs like EUR/JPY and GBP/JPY. If you see that one of these crosses is about to break a key technical level, it can do release a fury of JPY buying or selling that will have a massive effect across the board.