Best Forex Brokers in Japan

History of Forex Trading in Japan

The Japanese currency, also known as the Yen is the world’s third most traded currency after the U.S. dollar and the euro. It is also used extensively as a reserve currency around the globe. It was established in 1871 after the government see the need to employ a uniform currency across the country, an event that was followed by the establishment of the Bank of Japan which took control of the money supply in 1882. World War II caused the Yen to lose its initial value. A system for financial management, known as the Bretton Woods System fixed the yen at 360 per $1 in a bid to stabilize it. This was until 1971 when the system was cast aside that the Yen failed to appreciate as a result of Japanese exports having very low prices in the foreign market and the imports costing Japan rather too much. It was after this that the currency was allowed to float. The yen went through a series of appreciation and depreciation until 1980 when it stood at 227 against the U.S. dollar.

In the early 1980s, the account surpluses experienced rapid growth but it was not corresponding with the value of the yen, it still failed to increase in value. A high demand for the yen in international trade arose due to the increment of surpluses, but there still were factors that hindered the growth of the currency. Such factors were differences in interest rates for the dollar and that of the yen and the efforts to remove state regulations on the international flow of capital which led to an outflow of capital from the country.

 The supply of the yen in the foreign exchange market increased due to the increase of capital flow making the Japanese investors convert the yen to other currencies to invest abroad. However, some changes occurred in the demand and supply in the market making the yen increase in value to 80 yen per $1. The yen still followed depreciation later, calling for the Bank of Japan to come up with measures intended to pull the currency out of deflation.

Japan Forex Brokers Regulations

The Forex market is the most liquid and largest in the world. In recent years, the Forex market had been deregulated to improve financial and information technology. The FX market has continued to grow globally and has become an integral factor in the global economy. If the FX market remains unregulated, forex brokers are bound to take advantage of the clients through practices that are not honest and transparent. This is concerning Japan and all other countries that are involved with foreign exchange. There was a need for regulatory bodies to be established in Japan to protect traders from broker malpractices and offshore brokers did not attract clients from Japan.  The following authorities are in charge of forex brokers’ regulation in Japan.

Financial Futures Association of Japan (FFAJ)

The Financial Futures Association of Japan (FFAJ) was founded in August 1989. This was through the authorization by Financial Futures Trading Law that was implemented in 1988. This was in a bid to ensure that investors were protected and there was healthy growth of the futures market through proper governance of firms in the futures market. 

After the revision of the Financial Futures Trading Law that took place in 1992, the Financial Futures Association of Japan augmented its duties as a self-regulatory authority to improve its services.  In July 2005 the Financial Futures Laws were revised. The revision resulted in transactions of financial futures being conducted over the counter to also be considered as financial futures business. The following services were also added to FFAJ:

1. Registration of the representatives of the traders
2. Services for conflict resolution between members and Financial Futures Trading Law alongside other laws relative to investment were merged after the enactment of the Financial Instruments and Exchange Law (FIEL). That was on 30th September 2007. FFAJ had a membership of a total of 146 organizations by March 2018. It is still in pursuit of its objective which is registering financial institutions, providing guidance, mitigating grievances, conflict resolution, public relations, and market planning and research. The following are the body’s major roles.

1) Creating laws that are self-regulatory for its members and further give direction, audit, and recommendations.

2) Working towards responsive resolution of grievances and conflicts of investors in coaction with the members. 

3) Pursue research based on both foreign and domestic financial futures industry and use statistical data acquired to compile recommendations that will promote the growth of the industry.

4) Providing disclosure on financial futures, undertaking public relations, and carrying out training and holding seminars.

Financial Services Agency (FSA)

Financial Services Agency, or FSA, is a government regulatory body that is in charge of supervising insurance, securities, banking, and exchange.

The primary objectives of the FSA are;

1. Stabilize the Japanese financial market
2. Protection of Investors in the Securities Market
3. Protection of depositors
4. Protection of insurance Policyholders
5. Inspect and supervise the clarity of securities in the financial market
6. Supervise Japan’s Certified Public Accountants
7. Carry out audits on the Oversight Board 

Financial Services Agency was founded under the arbitration of the Financial Reconstruction Commission. FSA’s headquarters are based in Tokyo.

Simplifying the functions of FSA:

 After the restructuring of the central government ministries of Japan, FSA became an external body of the Cabinet. FSA reports to the Minister of States for Financial Services of Japan. The authority is also headed by a commissioner.

The body is in charge of planning and formulation of policies in alignment with the country’s financial system. It is also responsible for setting compliance rules and those for trading in the market. It also has a role in overseeing auditing firms and certified public accountants. Last but not least, surveillance of institutions in the private sector.

In further efforts in its duties, FSA has adopted a role having oversight of cryptocurrency exchange. Reports by Forbes in April 2018 stated that FSA had been advocating for a stop to be put to particular cryptocurrencies that had been compromised b computer hackers and cybercriminals. It was pushing traders to stop indulging in exchanges of those currencies. This was an aim to prevent stem criminal practices and money laundering.

FSA was reportedly taking "all available steps to discourage the use of certain alternative virtual currencies that have become attractive to the underworld because they are difficult to track," according to the Forbes article.

The agency had even given directives for certain cryptocurrency exchanges to cease. After an incident whereby there was a hacking theft of $532 million, FSA ordered a shutdown of two exchanges to give it time to mitigate the theft. That was in April 2018.