January 26, 2021 | AtoZ Markets – Forex trading in Japan has been a topic of debate among traders. People often get confused over the fact whether it is legal or illegal. Different people may have different perceptions but most of them don't know how it works. In this article, we have discussed all you need to know about forex trading in Japan.
Japan offers lots of opportunities to traders who want to trade Forex and make a profit out of it. Are you enthusiastic about the opportunity but don’t know where to start? If you want to practice online currency trading in Japan, you must be aware of all the aspects. Let's start with the Financial Services Agency (FSA).
What is FSA?
Established in 1998 as an administrative wing of the Prime Minister’s Office, Japan’s Financial Services Agency (FSA) was created as a regulatory body in 2000 by the Financial Reconstruction Commission (FRC). Previously responsible only for the supervision of private-sector financial institutions, after reorganization by the FRC, the FSA became Japan’s primary financial regulator and is now responsible for the stability of the wider financial system and the protection of its participants – a mandate which includes a duty to combat money laundering and the financing of terrorism.
The FSA is headquartered in Tokyo and is led by its Commissioner – currently Nobuchika Mori – who reports directly to a ministerial team and the Japanese Minister of State for Financial Services. The FSA maintains local and regional offices in numerous locations around Japan.
What does the FSA do?
As Japan's financial regulator, the FSA has authority over Forex brokers, banks, insurance companies, trust companies, and other obligated financial institutions. It protects and maintains the stability of Japan’s financial system by overseeing the inspection and supervision of those institutions to ensure their compliance with Japanese and international law. The FSA also plays a role in developing new financial legislation in coordination with the Japanese government.
The FSA is structured to address the contemporary challenges of financial markets and respond effectively to threats.
When Forex brokers violate the FSA rules, the regulator has the power to impose punishments including the limitation of operations, financial penalties, and even prison terms for individuals responsible for wrongdoing.
That said, is Forex trading legal in Japan?
Is Forex trading legal in Japan?
Yes! It is legal to trade Forex in Japan. In 1998, an amendment was made to Japan’s Foreign Exchange and Foreign Trade Control Law, thus making Forex trading legal and more accessible to Japanese traders. As a result of this amendment, the Japanese yen has grown to make up almost 17% of the total Forex market.
If you’ve ever wanted to partake in trading Forex but you weren’t sure how to get started, read on as this article will help you begin.
How to start Forex trading in Japan
Before you trade Forex in Japan, you’ll need to open a brokerage account. As an FX trader, 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.
- Step 1: 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.
- Step 2: 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.
- Step 3: 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 5 for improved functionality.
- Step 4: 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.
- Step 5: Start trading. Once your account is open and fully funded, you can place your order.
So how do you choose the best Japan forex broker for you? Finding a good broker isn’t easy, so we have compiled a list of Japanese brokers for you, based on our research and user feedback.
Top 3 Forex brokers in Japan
Forex brokers in Japan are highly regulated — and there are many reliable Forex brokers offering accounts to Japanese residents.
Japan Forex brokers offer their clients, in addition to Forex currency pairs, also trading of other asset classes. These are most often CFDs on stocks and indices, CFDs on precious metals and cryptocurrencies.
If you aren’t sure where to open an account, below are what we believe are the best 3 Forex brokers in Japan:
- HotForex
- Avatrade
- FBS
1# HotForex
HotForex is an award-winning forex and commodities broker, providing trading services to both retail and institutional clients. By providing effective services HotForex has established itself as the choice of traders. They provide various account types, trading software and tools to their clients in order to trade Forex online. HotForex is also known for its superior trading conditions and lightning-fast execution.
Pros
- Multiple regulations.
- Commission-free trading accounts available.
- Competitive spreads from the live comparison table.
- Lots of premium MetaTrader tools and indicators such as AutoChartist.
Cons
- Only 56 shares are available.
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2# Avatrade
AvaTrade is a well-established Forex / CFD brokerage house that was founded in 2006 and has been conducting business ever since. AvaTrade is a member of the Ava Group which is headquartered in Australia. AvaTrade was one of the first major brokerages in the retail Forex/CFD field, so it has a long track record.
They have regional offices and sales centers in Paris, Dublin, Milan, Tokyo, and Sydney and the administrative headquarters is in Dublin, Ireland and it’s no wonder that the company has earned nine industry awards since 2009.
3# FBS
FBS is a Forex ECN and CFD broker that was established in 2009 and is regulated by the IFSC in Belize and the CySEC in Cyprus. Since then, the brand has grown in size, capacity, and technology and now supports 12 million traders from over 190 countries trading across Forex, Commodities, Metals, Cryptocurrencies, and more.
FBS uses the hybrid broker model of Straight Through Processing (STP) and an Electronic Communications Network (ECN). There is no dealing desk as orders are passed directly into the systems of the liquidity providers at the actual market prices.
Pros
- MT4 and MT5 integration
- Ultra-low minimum deposits
- Competitive zero-pip spreads
- Range of promotions & deposit bonuses
Cons
- Fewer account and trading options in the EU
- Commissions payable on many trade types at the global firm
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The future of Forex trading in Japan
Japan continues to be one of the major Forex markets in the world, and regardless of the various guidelines imposed by the FSA on Forex trading; retail FX trading continues to be hugely popular among Japanese investors.
Although the FSA of Japan is working tirelessly to prevent overseas brokers from operating in the country, several international brokers are setting up dedicated brokerages in Japan to offer different products and services through their local subsidiaries.
Japanese traders might feel limited due to the various trading restrictions, but it is guaranteed that the retail trading market will customize their strategies to incorporate the new rules put forward by the Government.
Conclusion
From the above discussion, one can easily conclude that Forex trading in Japan is very legal but it must be done following certain laws and regulations. If you want to offer any non-banking financial service, you first need to establish an entity in Japan and get licensed. Following that, you can deal in forex or other online trading activities.
The same is applicable to traders i.e if you want to practice Forex trading in Japan, you should first check with the broker if it is licensed and regulated by the FSA or other regulatory authorities.
Think we missed something? Let us know in the comment section below.