Located in East Asia, Japan is an island country composed of 6,852 islands, and its main land is composed of 4 large islands.

Despite being a relatively small country, Japan’s capital, Tokyo, has 36 million hardworking citizens, making it the world’s largest metropolis.

Although Japan is densely populated, the Japanese have a high-quality life and the longest life expectancy in the world.

Japan is also one of the most advanced and technologically advanced countries in the world. Can you imagine a world without karaoke, video games, or Toyota Prius? Never thought about it—that’s right.

In addition, do you know that “Japan” literally means the source of the sun, and Japan is often referred to as “the country of the sun”?

Neighboring countries: Russia, South Korea, North Korea, China

Area: 234,825 square miles

Population: 127,368,008

Population density: 542.40 people per square mile

Capital: Tokyo (population 13,189,000)

Head of State: Emperor Akihito

Head of Government: Prime Minister Yoshihiko Noda

Currency: Japanese Yen (JPY)

Main imports: petroleum, liquefied natural gas, clothing, semiconductors, coal, audio-visual equipment

Main exports: motor vehicles, semiconductors, steel products, auto parts, Suzuki Ichiro (Suzuki Ichiro), Sony game consoles, samurai swords

Import partners: China 22.1%, US 9.9%, Australia 6.5%, Saudi Arabia 5.2%, United Arab Emirates 4.2%, South Korea 4.1%

Export partners: China 19.4%, US 15.7%, Korea 8.1%, Hong Kong 5.5%, Thailand 4.4%

Time zone: East Kowloon

Website: http://kantei.go.jp

Economic overview

In addition to being the world’s video game capital, Japan’s economy is also among the best, ranking third in the world in 2011.

Since the end of World War II, the Japanese economy has experienced rapid development. Japan is a hilly and volcanic country. Due to natural laws, Japan’s natural resource growth is limited.

To make up for the scarcity of resources, the Japanese economy mainly depends on exports. In 2011, the total value of Japan’s exports exceeded US$800 billion. This value accounts for 14% of Japan’s total output and ranks fifth in the world.

Recently, the Japanese economy has been promoted by the rapid growth of the Chinese economy. Since Japan is the main economy nearest to China, the increase in demand in China has led to a frantic purchase of Japanese products.

Japan not only has delicious food, but also Tokyo, one of the world’s largest financial centers.

As you can see in the movie, Japanese businessmen are very strict in doing business. A large amount of capital flows in and out of Tokyo every day, and traders and investors can use Tokyo as an indicator of what is happening in the Far East.

Monetary and fiscal policy

The Bank of Japan was established in the late 19th century, but it was not independent from the Ministry of Finance until recently. It was not until 1998 that the Japanese government passed a decree on monetary policy formulated by the Bank of Japan. It should be noted that the foreign exchange policy is still formulated by the Ministry of Finance, which makes the differences between the two constantly.

Usually, the government and the central bank depend on each other—influencing each other. This is not the case in Japan. Even if the Bank of Japan becomes independent from the government, who is in charge is still a problem.

The Ministry of Finance of Japan usually pays close attention to the Bank of Japan and pressures it to pass relevant policies to help the Ministry of Finance achieve foreign exchange conversion goals. Similar to other central banks, the Bank of Japan’s goal is to maintain price stability. Bankers in the Bank of Japan used open market operations and interest rate changes to achieve their goals.

Regarding the Bank of Japan, you should know that the Bank of Japan has maintained interest rates at a low level for a long time. The current interest rate is between 0.00% and 0.10%. Because interest rates are already low, the central bank cannot lower interest rates to stimulate growth or increase liquidity.

In the fight against deflation, the Bank of Japan will adopt an unorthodox quantitative easing policy to inject large amounts of money into the market.

Quantitative easing measures refer to measures taken by the central bank to increase liquidity and money supply by purchasing government securities.

This is sometimes called “printing money”. Because the central bank actually created new money out of thin air to buy back government securities. Theoretically, the money supply increases and the expenditure increases.

Over the years, Japan has increased market liquidity through various bond and bill purchase programs.

Understanding Japanese Yen

Compared with other currencies with many nicknames, the Japanese yen is an alternative. It was called the Japanese Yen when it entered the foreign exchange market, and it remains so. Its changes are also related to cross currencies, especially the Euro, British Pound and Australian Dollar.

Traders like me like Japanese people like sushi.

In addition to the US dollar and the euro, the Japanese yen is the most widely traded currency, and the USD/JPY is the second most traded currency pair. Because the yen plays a very important role in international transactions, the yen is required to complete international transactions.

Are you ready to experience the Asian feeling?

When investors think of Asia, they think of Japan subconsciously. There is Tokyo, one of the world’s major financial centers, and Japan usually represents changes in Asia.

Japan is an important trading partner of other Asian countries. If Asian business prospects are good, this will be reflected in the Tokyo 225 average index.

I am always busy…

Japan’s related economic report was released during the Asian session, so the yen transaction was more active during the Asian session.

The yen will also be active in other periods, but it depends on what economic data is released. It’s worth noting that this is part of Japanese culture and they work 24 hours.

…I am anxious to experience cheap stimulation!

Many investors want to make a fortune, while some will seek arbitrage trading. The yen has the lowest interest rate among all major currencies, so it is often used as a source of funds for arbitrage transactions.
Japanese people have similar ideas.

Japanese asset managers usually make the same investment decisions. This also led to the highly correlated positions they held, which also meant that the yen exchange rate trended.

I easily break out…

One of the characteristics of the Yen currency pair is that they will maintain sideways consolidation for a longer period of time, and then there will be a directional breakthrough, and then sideways consolidation again, and seek a directional breakthrough again! Open your eyes and open your ears because you don’t know when the breakthrough will occur!

…I have a love-hate relationship with China

As China gradually rises as a world power, his influence on the yen will continue to increase. If the Chinese economy shows signs of continued growth, the demand for the yen will be affected.

how so?

As we said before, China is one of Japan’s important trading partners. Normally, if China’s business is booming, it will order more goods from Japan. This will increase the demand for the yen and cause the yen to appreciate.

Important yen economic indicators

GDP: This indicator measures Japan’s economic activity. It shows whether the economy is as hot as Mount Fuji’s magma, or it is declining.

Tankan survey: This report surveys managers in various industries and asks their views on the economy. Increased sentiment (score above 0.0) indicates that Japanese businessmen believe that business activity will increase. Otherwise, decrease.

Trade balance: The Japanese economy depends mainly on exports. Declining export data will lead to reduced economic activity.

Unemployment rate: This indicator measures the unemployment rate in Japan. High unemployment will lead to lower consumer spending-how can they afford video games and animation?

Consumer Price Index (CPI): In the past, the Bank of Japan said they were not afraid to take measures to fight back deflation. If prices continue to fall, the Bank of Japan may take some amazing measures.

Core machinery orders: Japan’s exports include a large number of industrial orders. The increase and decrease of core machinery orders will reflect the current status of Japanese trade.

What factors influence the trend of the yen?

Investment changes

Due to low interest rates, the yen is seen as an important source of investment funds. This means that if traders and investors are afraid, they will reduce their holdings of high-yield assets. Once traders start to cancel high-yield asset positions (arbitrage transactions), they will close the yen short by buying back the yen.

Bank of Japan effect

What I want to say here is currency intervention! The Bank of Japan and the Ministry of Finance are very concerned about the foreign exchange market. Since the Japanese economy depends on exports, changes in the price of the Japanese yen play a significant role in the transaction.

The Bank of Japan does not want the yen to increase in value too much, because that would cause the relative increase in the prices of Japanese exports. By keeping the yen’s price at a low level, it can stimulate demand for Nissan’s commodities, which in turn is conducive to economic growth.

USD/JPY transactions

The number of USD/JPY transactions is measured in USD. A standard lot is $100,000, and a mini lot is $10,000.

The value of each point is measured in Japanese yen and is calculated based on the current price of USD/JPY (for the Japanese currency pair, the value retains two decimal places).

Gains and losses are denominated in yen. For a standard lot, the value of each point of change is 1,000 yen. For a mini lot, the change for each lot is 100 yen. For example, if the current exchange rate of USD/JPY is 95.00 and you want to trade a standard lot, then each point is equivalent to 10.52 USD.

The calculation of margin trading is based on US dollars. For example, if the leverage ratio is 100:1, the $100,000/JPY transaction requires $1,000.

USD/JPY trading tips

USD/JPY usually follows the short-term and medium-term trend, usually a few days. If you are trading in a band, that is, holding a position for more than 1 day, you can try to enter the market after the exchange rate has retreated.

Once the exchange rate starts to sideways, you can choose to close the position and wait for the next round of volatility. Note that when the price breaks through, you are likely to see a trend that continues to change, because there are constantly traders joining in.

Another point to remember is that Japanese industrial companies usually keep their positions at an integer level, such as 100.00 or 90.50. When the price is close to these values, you should pay attention to the changes, because these values ​​may become support or resistance levels.

Finally, you should pay attention to other yen currency pairs, such as euro/yen and pound/yen. If you find that these cross currencies have broken through a technical level, it will lead to a frenzy of buying or selling yen, which will have a great impact on trading.