Retail FX in Japan, 2020 Preview

Nine million retail account holders (~12% of Japan's adult population), of which 840,000 active FX traders in Q3 2019. US$18bn in client deposits. More than US$120bn in FX average daily volume on a slow day. 20+ midsized or large retail brokerage firms. Average USDJPY spreads of 0.35 pips.

The statistics driving Japan's 20-year-old retail FX industry are impressive, and yield valuable business insights for non-Japanese brokers, sell-side and vendor firms serving them, and even buy-side firms with exposure to Japan or to USDJPY. See Forex Datasource Retail FX in Japan, 2020 report released today.

One of the topics in this annual coverage of this market delves into the Mrs Watanabe myth. The myth has a basis on the reality that Japanese women tend to manage family finances. That a small portion of these housewives may dabble in FX markets shorting yen and buying currencies paying a positive swap is also based in reality. The narrative becomes a myth the moment that the massive mount of retail trading in Japan gets attributed to this particular group of market participants.

This author's primary research work of Japanese traders and data from brokers consistently reveals that 75% to 80% of all active traders are male, a figure that is consistent with speculative trading conducted in other parts of the world including the United States. Women, our studies reveal, are comfortable with family budgets while males are generally the ones placing speculative bets.

So if Mrs. Watanabes place a moderate amount of FX trading, rolling over positions, who does Japan's active FX trading?

Forex Datasource estimates that Japan's FX active trader population can be broken into four distinct trading groups:

1. True retail clients (non-semi-pros). An estimated 150,000 Mrs. Watanabes and 500,000 Mr. Watanabes place the equivalent of US$2.5m in notional volume each quarter
2. Tokyo FX traders (non-semi-pros). About 22,000 traders participate in the on-exchange Tokyo FX (TFX) market, and trade an average of US$3.3m in notional volume quarterly
3. Semi-professionals (semi-pros). About 161,000 traders Forex Datasource categorizes as semi-pros place an average of US$40m in notional trading volume quarterly
4. Corporate traders. Less known outside of Japanese broker circles is the fact that there are some 64,000 corporate accounts (of which 9,300 were active the last quarter of 2019) being served by retail FX broker firms; these 9,300 traders placed an average of US$75m in notional trading volume quarterly.

For additional info on active trader metrics, the latest changes in brokerage leadership, FXPB and internalization rates, and full access to this report's 31 charts, kindly contact Forex Datasource. info @ forexdatasource.com