As an advanced economy, Japan has long boasted a rich capital market that has attracted interest from all over the world.
Known for its high-tech, value-added industries, Japan is also a major financial center of East Asia, with some of the largest stock and commodities markets in the region.
Technological advancements in the country have democratized finance and more and more people have entered the market – trading anything from stocks and bonds to currencies and commodities.
Due to the Japanese yen being one of the four major currencies in the world, the demand for forex trading in the country has only grown over the years.
But how exactly has technology influenced the way people interact with the Japanese capital markets and what can we learn from this? – Let’s find out.
Technology and the Japanese forex market
As already mentioned, JPY is one of the four major currencies on the global market, which gives the Japanese forex ecosystem more relevance.
Numerous international forex and CFD brokers operate in Japan and offer their services to millions of clients in the country.
As for the trading platforms available in the country, cTrader, MetaTrader 4 and MetaTrader 5 are three of the most popular FX platforms used by traders in Japan.
Furthermore, most forex brokerage firms now use data analysis software to collect and analyze data based on market activity, providing valuable insights into the prevailing market dynamics at any given time.
How technology affects stock trading in Japan
The popularity of stock trading and investing has been on the rise over the years and has particularly accelerated its growth since the start of the democratization of financial services, which has introduced fractional share ownership, commission-free trading, and the securitization of alternative asset classes.
The Tokyo Stock Exchange also serves as a data vendor, selling trading data to brokerage firms and other third-party clients from the financial sector. This data and analysis also help traders make more informed decisions and identify trading opportunities in Japan’s financial markets.
Increased access to stock investing and related services has greatly increased the popularity of equities in the country and most brokers offer much more than just Japanese stocks, but equities from other developed markets, such as Australia, the UK, the EU, and the U.S.
This gives traders much more variety in terms of what they can invest in and trade – leading to much more liquidity on the market.
High-frequency and algorithmic trading in Japan
Technological advancements have introduced high-frequency and algorithmic trading to Japan, which are done using advanced AI algorithms that execute thousands of trades in a matter of seconds – generating small increments in profit, which add up over time.
HFT also greatly increases liquidity on the market – leading to a more fluid trading experience for every market participant.
However, the Japanese market authorities have proposed to tighten regulations on high-speed trading to avoid distorting the market due to excessive algorithmic trading.
Regardless, HFT plays an important role in maintaining high levels of liquidity on the Japanese capital market, especially during less active trading periods on the foreign exchange market.
Online trading growth in Japan and future prospects
The number of total active brokerage accounts reached over 41 million in 2023, which is roughly a third of the country’s population.
While this may mean that the room for growth in total number of accounts is limited, trading volumes still have plenty of room for growth.
As more and more people sign up to brokerage firms and make investments, the more liquidity there will be on the market, which makes the market more efficient for every participant. However, it must be noted that the long-term growth of the financial market, as well as the economy as a whole, is greatly affected by demographic changes, which is likely to hamper the growth of brokerage firms in the country.
