| Updated: December 2, 2024Japan, a country known for being one of the largest economies in the world, also happens to be a leader when it comes to forex trading. On a global scale, the Japanese yen is only behind the dollar and the euro in terms of trading, and the currency has been popular among fans of the carry trade the world over.
As is the case with the global forex sphere, the USD/JPY pair is prominent in Japan. In fact, it has long stood as the most traded currency pair in the country, with many USD/JPY transactions involving the aforementioned carry trade strategy. Individuals who make use of carry trading borrow a currency with a low interest rate and exchange it for a currency with a high interest rate. The goal is to take advantage of the difference between the two.
Japan’s foreign exchange market is regulated by the Financial Services Agency (FSA), which means that any company seeking to operate in the country and appeal to Japanese traders needs to make sure that it has a valid FSA license.
For those eager to learn more about forex trading in Japan, this publication explores the various statistics that shape the Japanese forex market.
History of Forex Trading in Japan
The Tokyo Stock Exchange’s roots date back to 1878, and Japan’s economy has had its ups and downs since its establishment. Of particular note was the so-called Lost Decade, which lasted between 1991 and 2000. It is referred to as such due to being a period of notable recession.
However, the Lost Decade is also characterized by a curious social phenomenon that shaped the global forex audience’s perception of forex trading in Japan. We are referring to Mrs. Watanabe, a term that represents the many Japanese housewives who are believed to have found great success as forex traders in the 90s and early 2000s. Over the years, the term also gained popularity as a way to refer to retail Japanese traders as a whole.
The Financial Services Agency (FSA), Japan’s financial regulator, was established in the year 2000 when the Financial Supervisory Agency and the Financial System Planning Bureau were merged into a single supervisory body.
Another key entity that plays a crucial role in Japan’s FX history is the Bank of Japan (BOJ), which was established in 1882. The BOJ has the authority to intervene in the forex exchange market when deemed necessary, and as described by the BOJ, this is done with the aim of stabilization. However, the BOJ has been known to be relatively averse to taking drastic actions. This hesitation is one of the factors that forex enthusiasts in Japan have to keep in mind when it comes to how they approach trading.
Since the year 2000, intervention has been done only around a dozen times. The longest pause lasted from 2011, when a strengthening yen threatened to impede Japan’s economic recovery efforts following the 2011 earthquake and tsunami, to 2022, when estimates pointed to the BOJ having spent trillions to prop up the yen amid a price surge of the dollar. The latter was never officially confirmed, however. The most recent instance of foreign exchange intervention happened in July 2024, when the JPY was supported with 5.53 trillion yen ($36.8 billion) with the intention of strengthening the currency.
The year 2024 also saw the BOJ put an end to the negative rates that used to be a core aspect of its monetary policy. Moreover, the country’s economy is finally seeing an increase in inflation after a long period of persistent deflation.
Finally, we should note that Japanese FX traders typically keep track of the Tankan survey, which has been issued by the BOJ on a quarterly basis since 1974. It gives traders a clear overview of how Japanese businesses are performing.
Japan Forex Market Size
The global FX market has long been considered to be the most prominent market globally, and the data certainly backs this up. As revealed by the Triennial Central Bank Survey 2022, the global FX market achieved daily transactions of $7.5 trillion in April 2022. Japan was among the five jurisdictions that represented the vast majority of trades:the UK, the US, Singapore, Hong Kong, and Japan. According to the BIS, 78% of trading involving forex pairs was conducted in the said jurisdictions. Of the five, Japan’s turnover represented 4.4% ($433 billion) of all global trading.
Aggregate Turnover
The Tokyo Foreign Exchange Market Committee has conducted various surveys focusing on the total value of the transactions tied to Japan’s foreign exchange market, typically referred to as the turnover or trading volume. A survey published in January 2024 covers the average daily turnover between April 2020 and October 2023, and it showcases notable upswings and downswings. The years 2021 and 2022 were the most impressive in terms of trading volume, but were followed by a decline in 2023. A second survey, published in August, revealed the figures for April 2024. As shown, the total trading revenue seems to be on the rise once again, although it is yet to reach the numbers reported in 2022. The following figures represent the daily averages in hundreds of millions of USD:
| April 2020 | October 2020 | April 2021 | October 2021 | April 2022 | October 2022 | April 2023 | October 2023 | April 2024 | |
|---|---|---|---|---|---|---|---|---|---|
| Spot | 1,353 (31.9%) | 1,382 (32.4%) | 1,389 (31.0%) | 1,355 (30.5%) | 1,643 (34.3%) | 1,809 (36.2%) | 1,214 (28.4%) | 1,235 (29.0%) | 1,288 (28.7%) |
| FX Swap | 2,253 (53.1%) | 2,239 (52.5%) | 2,344 (52.3%) | 2,451 (55.2%) | 2,313 (48.3%) | 2,434 (48.7%) | 2,356 (55.2%) | 2,295 (53.9%) | 2,553 (56.8%) |
| Currency Swap | 33 (0.8%) | 60 (1.4%) | 43 (1.0%) | 31 (0.7%) | 47 (1.0%) | 70 (1.4%) | 77 (1.8%) | 212 (5.0%) | 81 (1.8%) |
| Forwards | 547 (12.9%) | 515 (12.1%) | 633 (14.1%) | 524 (11.8%) | 654 (13.7%) | 537 (10.7%) | 497 (11.6%) | 411 (9.7%) | 455 (10.1%) |
| FX Options | 58 (1.4%) | 68 (1.6%) | 73 (1.6%) | 81 (1.8%) | 128 (2.7%) | 150 (3.0%) | 126 (3.0%) | 104 (2.4%) | 119 (2.6%) |
| Total | 4,243 | 4,263 | 4,482 | 4,443 | 4,785 | 5,001 | 4,271 | 4,257 | 4,495 |
The above also shows that Japanese traders tend to favor FX swap transactions over all other types, with spot transactions typically being second. Currency swaps, on the other hand, tend to rank last.
Japan Forex Trading Demographics
While Mrs. Watanabe has made headlines in the global forex sphere, it should be noted that women still account for the smaller percentage of FX traders in Japan compared to men. Back in the 2010s, it was believed that women made up roughly 25% of retail traders in the country, as seen in a 2013 publication by TIME, which included commentary by experts like Kazuhiro Koike and Vito Henjoto.
Since then, data has suggested that Japanese women’s interest in foreign exchange trading has waned to a certain extent, with notable figures being those of the Gaitame.com Research Institute. Gaitame.com released estimates in 2019, which showed a distribution of 85% (men) and 15% (women). The institute also noted that, in terms of age, the vast majority of forex traders in the country were over 30 in 2019, with some even being in their 40s or 50s.
Local vs Cross-Border Transactions
Another piece of data that the Tokyo Foreign Exchange Market Committee (TFEMC) focuses on when it comes to its surveys pertains to how many transactions on the Japanese forex market are made locally and how many are cross-border. On average, it appears that cross-border transactions typically make up over 50% of transactions, and this trend has been a consistent factor in recent years. The following data represents the daily averages in hundred millions of USD:
| April 2020 | October 2020 | April 2021 | October 2021 | April 2022 | October 2022 | April 2023 | October 2023 | April 2024 | |
|---|---|---|---|---|---|---|---|---|---|
| Local Transactions | 1,973 (46.51%) | 1,991 (46.70%) | 2,137 (47.67%) | 1,917 (43.14%) | 2,120 (44.31%) | 2,165 (43.29%) | 1,910 (44.70%) | 1,845 (43.34%) | 1,938 (43.11%) |
| Cross-border Transactions | 2,269 (53.48%) | 2,272 (53.29%) | 2,345 (52.32%) | 2,526 (56.85%) | 2,664 (55.68%) | 2,836 (56.70%) | 2,362 (55.29%) | 2,412 (56.65%) | 2,557 (56.88%) |
| Total | 4,242 | 4,263 | 4,482 | 4,443 | 4,784 | 5,001 | 4,272 | 4,257 | 4,495 |
Japanese Yen vs Other Currencies
According to data from the Bank For International Settlements, in 2019, the Japanese yen was the third most traded currency on a global scale, with 17% of trades involving the yen. The euro was second at 32%, while the USD, as is typically the case, remained on top with a percentage of 88%.
Fast forward to the year 2023, and we can see that the above ranking was mirrored when it came to the world’s allocated reserves when categorized by currencies. In 2023, the Q4 reserves in Japanese yen accounted for 5.7% of the total currency reserves on a global scale, as shown in data gathered by the International Monetary Fund. In contrast, the currency with the largest amount of allocated reserves was the USD (58.41%), while the euro (19.98%) was in second place.
The USD’s prominence is notable in Japan as well. As shown in the Tokyo Foreign Exchange Market Committee’s turnover survey, the year 2024 saw the yen being second to the USD in terms of total turnover, although it did manage to overtake the US dollar when it came to certain transaction types. In terms of spot trading, they were almost identical, with the JPY having a turnover of 2,241,735 in millions (USD), while for the US dollar, the figure sat at a slightly lower 2,172,899 in millions (USD). As for FX swap trading, their positions were reversed, with the US dollar (4,527,390 in millions of USD) beating the Japanese yen (4,019,748 in millions of USD). You can see a breakdown of the top 5 currencies by turnover below, shown in millions of USD:
| USD | JPY | EUR | AUD | GBP | |
|---|---|---|---|---|---|
| Spot | 2,172,899 | 2,241,735 | 344,418 | 184,330 | 143,473 |
| FX Swap | 4,527,390 | 4,019,748 | 712,054 | 423,152 | 258,545 |
| Currency Swap | 163,830 | 155,312 | 5,098 | 1,725 | 856 |
| Forwards | 712,924 | 803,976 | 143,936 | 54,086 | 33,843 |
| Non-Deliverable Forwards | 50,802 | 1,026 | 98 | 0 | 8 |
| FX Options | 225,060 | 210,352 | 26,273 | 11,049 | 1,342 |
| Total | 7,852,905 | 7,432,149 | 1,231,877 | 674,342 | 438,067 |
It should also be noted that both the JPY and USD dominated the Japanese market in terms of turnover. The EUR, GPD, and AUD had a much lower turnover in comparison, as was the case with other currencies.
Most Popular Currency Pairs in Japan
Seeing as the US dollar is famous for the sheer volume of FX trades it is involved in both abroad and in Japan, it should not come as a surprise that the TFEMC has found that, in October 2023, the USD/JPY remained the most popular currency pair among Japanese forex traders. Transactions involving this pair accounted for 63.11% of the total turnover. The EUR/USD, in contrast, had a turnover of a mere 6.74%, and the EUR/JPY was not that far behind at 6.26%. The TFEMC also provided extensive information on the performance of each forex pair, and below, traders can familiarize themselves with the total transactions executed for October 2023 per currency pair in millions of USD:
| USD/JPY | EUR/USD | EUR/JPY | Others | Total | |
|---|---|---|---|---|---|
| Spot | 1,553,916 | 190,458 | 185,550 | 663,119 | 2,593,043 |
| FX Swap | 2,971,030 | 371,733 | 243,435 | 1,233,884 | 4,820,081 |
| Currency Swap | 428,921 | 1,996 | 7,121 | 7,216 | 445,253 |
| Forwards | 516,154 | 24,201 | 115,266 | 207,154 | 862,775 |
| FX Option | 171,411 | 14,491 | 8,156 | 23,932 | 217,990 |
| Total | 5,641,432 | 602,879 | 559,528 | 2,135,305 | 8,939,142 |
| Total Percentage | 63.11% | 6.74% | 6.26% | 23.89% | 100.00% |
As for 2024, according to April’s data (released in August 2024), the USD/JPY remained the leader. However, the EUR/JPY managed to overtake the EUR/USD and now accounts for 6.50% of the total turnover.
| USD/JPY | EUR/USD | EUR/JPY | Others | Total | |
|---|---|---|---|---|---|
| Spot | 1,786,523 | 146,178 | 171,156 | 601,359 | 2,705,216 |
| FX Swap | 3,323,707 | 357,191 | 316,024 | 1,364,428 | 5,361,349 |
| Currency Swap | 149,726 | 1,291 | 3,710 | 14,688 | 169,416 |
| Forwards | 572,003 | 27,271 | 113,681 | 242,123 | 955,078 |
| FX Option | 188,463 | 14,559 | 9,938 | 36,491 | 249,451 |
| Total | 6,020,422 | 546,490 | 614,509 | 2,259,089 | 9,440,510 |
| Total Percentage | 63.77% | 5.78% | 6.50% | 23.92% | 100.00% |
Most Popular International Forex Brokers Among Japanese Traders
We have established that Japan’s financial sphere is regulated by the Financial Services Agency (FSA). This supervisory entity is in charge of licensing forex brokers that operate solely in Japan and have an audience that is primarily Japanese, as well as international entities seeking to appeal to Japanese traders.
Both domestic and offshore brokers have gained a foothold in the Japanese forex market, and in 2023, Media With (メディアウィズ) conducted a survey seeking to assess which international brokers have the strongest presence in Japan. A total of 435 Japanese traders participated in the survey, and they were asked to specify which international broker they utilize the most.
As seen below, XMTrading emerged as the most popular broker, with more than half of the survey’s participants stating that they use XMTrading on the regular. Other names that traders from overseas might be familiar with include Exness, FXGT, TradeView, and Vantage.
| Broker | % of Survey Participants Who Use This Broker |
|---|---|
| XMTrading | 51.90% |
| FXGT | 9.20% |
| BigBoss | 5.70% |
| TitanFX | 5.30% |
| AXIORY | 5.00% |
| Bybit | 4.40% |
| Exness | 3.60% |
| iFOREX | 2.90% |
| IS6FX | 1.90% |
| ThreeTrader | 1.70% |
| TradeView | 1.70% |
| Vantage | 1.30% |
| IronFX | 1.10% |
| FBS | 1.10% |
| easyMarkets | 1.10% |
| LandFX | 0.80% |
| Others | 1.50% |