How is the Japanese Forex market? Brokers? Licenses? What trading conditions?

March 31, 2016

Are you looking to grow markets in Japan?
We, Hercules are specialized in Japanese Forex & CFD Market, and would like to share some interesting information with you.

japan forex market brokers

Growing your market in another country is not the easiest thing, but Japan? Well, Japanese Forex market is one of the biggest in the world and it has got totally different conditions which is not like the others.

We, Hercules wants to share some interest things about Japanese Forex Market.

Japanese FX & CFD brokers

There are about 73 Forex brokers officially registered with JFSA in Japan.

*Japanese Financial Services Agency

And about 7 biggest brokers dominate the Japanese market, and others are being active in their small areas.

JFSA, the regulatory authority of Japan does not prefer that Japanese traders opening accounts with foreign brokers, so JFSA often posts up a notice saying “Be careful of foreign brokers, they are SCAM” (basically that what it says..).

So it is commonly known among Japanese traders that foreign brokers are SCAM or at least high risk of making deposits.

These 73 brokers do not promote outside of Japan, and Japan itself wants to close the country in regards to Forex & CFD markets.

How many clients?

Although, Japanese Forex market may be the biggest in the world, but that doesn’t mean that these brokers have the largest number of clients.

These are the numbers of accounts held by the brokers in 2016:

  1. GMO Click Securities – around 420,000 accounts
  2. YJFX – around 290,000 accounts
  3. Money Partners – around 270,000 accounts
  4. Hirose Financial (Lion FX) – around 190,000 accounts

These are the some biggest brokerage firm in Japan, and the number of accounts are the total number since the start of the service (about 10 years).

We are not sure about how these numbers are calculated, but considering that FBS has achieved to have 1,000,000 real/live accounts and XM is 500,000 accounts this year, the numbers are not too large.

But please note that some of the Japanese brokers do not allow traders to open several accounts per person.

What products are offered?

Most of the brokers offer only Forex currency pairs as product and not CFDs.

And the number of the Forex pairs is about 20 or sometimes even less than that.

Some brokers offer 100 or more financial products such as Stock CFDs and ETF though, these are still not the popular choices for traders.

14 main currency pairs are good enough for Japanese traders, as some biggest brokers succeeded to expand its market by offering only these Forex product, but not even one CFD.

OTC or STP?

It is commonly known that all the brokers were OTC model until 10 years ago when “Click 365” has started its operation in TFX (Tokyo Financial Exchange).

But still in 2016, only about 17 brokers offer the trading option with Click 365.

So all 73 brokers are still complete OTC model and only 17 brokers out of them also offers the trading with Click 365. (these 17 brokers separate the groups as OTC trading or Click 365 for clients)

In 2016, OTC model is still the main stream in Japanese Forex market, some brokers are still restricting certain trading methods which are Hedging, Arbitrage, Scalping and EA trading, and manipulating prices to make profits. (at least that’s what traders discuss and complain all the time)

What is Click 365?

Click 365 is the first exchange listed FX margin contracts that TFX launched.

It is the first STP trading environment for traders and was a savior for the traders who were not satisfied with the brokers’ price manipulation and trading restrictions.

Although, the spread offered in Click 365 is wider than other brokers like 3 pips or more, the exchange itself is still acquiring traders now.

Spread is the tightest

Other than the Click 365, the spread offered by Japanese brokers may be the tightest in the world, as they normally offer fixed spread of 0.1 – 0.3 pips.

These tightest spread are offered only with a few currency pairs, and variable spreads are not so popular in Japan.

Why they can offer such tight spread? That is because they are making money by hedging clients’s orders, but spread business is not the biggest for these brokers.

Leverage is 1:25

The maximum leverage for individual traders are limited to 1:25 and 1:100 for corporate.

It is restricted by JFSA and all the JFSA registered brokers need to limit the leverage as above.

This is one of the reasons for the Japanese traders to choose foreign brokers to trade with high leveraged accounts.

No Negative Balance Protection

As JFSA rules the conditions, the Japanese brokers cannot offer NBP to its clients.

So broker are not allowed to cover the losses in the accounts. All clients are responsible to pay the losses caused in his/her account later on.

This has resulted in, more than 50 millions dollars of debt are still not paid by the traders to brokers.

Some economy shocks like “Swiss Franc Shock” is the biggest enemy for Japanese brokers.

Trading restrictions

Like already mentioned above, more than 80% of brokers are complete OTC model.

So to make profits and not to end up in bankruptcy, the brokers need traders to lose money by trading.

Thus, there are so many restrictions on the trading methods like hedging, arbitrage, scalping and EA trading.

And it often happens that price quote jumps a few hundred pips in a moment, and many thousand of accounts reaches loss cut. (almost every few months)

So the trading environment is really not liberty but restricted and controlled by the brokers.

Not MT4 but…

MT4 is not the most popular trading platform in Japan, but each broker has developed its on trading platforms and most of them are only online platform.

As MT4 is the most popular platform in the world, Japanese these invented platforms’ quality is much lower compared to the MT4.

For example, price quote every one minute or stop loss system censors every 15 seconds are not so unusual.

We believe that MT4 will be known in Japan and become the most popular one anytime soon though, it is still not happening.

Japanese license JFSA

JFSA is the financial regulatory authority in Japan, and it does restrict a lot of things and that may be the biggest reason why Japanese Forex Market is not growing so much.

For brokers outside of Japan, it is impossible to acquire the license to officially provide FX&CFD service toward Japan, but it will require an office, highly managed compliance procedure etc and also cost some money.

Now it is normal that brokers in New Zealand, Cyprus, England and Russia are offering their services from outside of Japan but towards Japan without the JFSA license.

By using the IBs, these brokers doesn’t even have to have an office in Japan but able to acquire the Japanese clients.

Although it is not totally a legal thing to market directly towards Japan, but no one is really stopping them. (but JFSA)

Why Japanese traders choose foreign brokers?

There is a lot of reasons of why Japanese traders are so interested in the foreign brokers.

Let me just list up the reasons below.

  • High leverage

Japanese brokers offer only up to 1:25, but some foreign brokers even offer 1:3000.

  • NBP (Negative Balance Protection)

Japanese brokers do not cover losses, traders need to own debt by losses.

  • Bonus Promotions

JFSA also does not allow some fancy bonus promotions like no-deposit bonus, 100% deposit bonus etc.

  • Trading Restrictions

If hedging, scalping and EA tradings are allowed in trading, the condition would be better than most of the brokers in Japan for traders.

Hope it helped..

We, Hercules are especially specialized in Japanese Forex & CFD markets.

You are all welcome to contact us for any requests or partnership.

 

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