Japan FX volumes soaring during December

New Government’s policy of currency devaluation bringing back traders.

In our discussions with Japanese retail FX brokers over the past few weeks, it seems that they are seeing a healthy increase in domestic trading, mainly around the USDJPY pair. Japan’s new government, led by Prime Minister Shinzo Abe, has made strengthening Japan’s economy by (in part) working to devalue the Yen a major part of its platform.

And the markets seem to be believing the new government, even before it has had a chance to act, sending the Yen down to a 27-month low against the U.S. dollar at more than 85 Yen to the dollar (see two-year USDJPY chart below). This new volatility in the Yen, and the perception that it is likely in for a wild ride in the coming days and weeks, has brought traders back from the sidelines where many have been since Japan’s financial regulator lowered allowed leverage on spot FX transactions to 25:1 back in the summer of 2011.

The drop in Japanese retail FX trading levels the past two years has fomented a lot of consolidation in the Japan market, with foreign firms stepping in to buy struggling Japanese firms, larger Japanese firms gobbling up weaker and smaller competitors, and some players (such as Monex Group) looking to deploy capital elsewhere by acquiring abroad.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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