Japan was overtaken by Singapore in FX trading as far back as 2013. But while the business in Tokyo is less diversified than in other Asian trading hubs, Japan appears pretty relaxed about its capital’s dependence on the yen.
That might be because its share of activity is still going up. The most recent Bank for International Settlements central bank survey found that although Japan had fallen from fourth to fifth in the FX trading rankings, its share of the global FX market increased from 5.6% in 2013 to 6.1% last year.
Coupled with a slight decline in yen trading over the same period, this points to a minor reduction in Tokyo’s dependence on its domestic currency, suggests Celent analyst Brad Bailey. “The bulk of trading out of Tokyo is JPY/USD,” he says. “Even other yen crosses are quite small with some time zone-dependent trading in EUR/JPY, which has seen relatively strong growth this year.”
While Tokyo is by far the largest Asia trading centre for yen, all Asian trading centres rely on yen volumes, it being one of the world’s most heavily traded currencies. Michael Moran, an analyst with Royal Financial in Sydney, observes that while leverage in Japan for retail FX is among the tightest in Asia, the number of Japanese retail FX traders has grown in recent years and the Bank of Japan is keen for Tokyo to retain its status as the centre of excellence for yen trading.
