Looking East: Japanese Yen on Forex
To trade on the Forex market and at the same time make a profit, it is not enough just knowledge of technical analysis, you still need to understand a number of factors that affect quotes and market instruments.
All new information about the state of the market is immediately perceived by the largest participants, such as banks, institutional investors and investment funds. They apply it by influencing prices and market behavior in general. Therefore, it is desirable for traders to understand what factors and how can affect the market situation.
The lion’s share of transactions in the Forex market is accounted for by 7 major currencies. The Japanese yen is one of them. Both professionals and beginners of the Forex market are fond of trading in pairs that include the yen.
The economy behind the yen
The Japanese economy is one of the largest setters of stock market behavior in the world, but its growth has slowed significantly in recent decades. Inflation in Japan is practically absent, on the contrary, deflation is sometimes observed. Along with this, Japan is inherent in one of the acute demographic problems – the aging of the nation. With all this, Japan is a leader in the production and export of electronics, automobiles, components for electronic and electrical goods. To stimulate demand and economic growth, as well as increase the competitiveness of goods destined for export, the Central Bank of Japan has kept interest rates low for a long time.
Fundamental reports affecting the yen rate
To analyze the rate of the Japanese yen and the state of the market, you need to use reports similar to reports of other countries, namely: data on retail sales, GDP, industrial production, the state of the trade balance and inflation. You should also take into account the size of interest rates in force in the country, data on natural disasters and natural disasters, which, alas, are not uncommon for Japan. The dramatic changes in the volume of trading in stocks and currencies are influenced by the Tankan-report, which is issued quarterly by the Bank of Japan. Therefore, it should also be taken into account when analyzing the market situation.
Most often, the yen is used as a pair currency by traders using the carry trade strategy. that is why the slightest change in Japanese policy can significantly change the life and fate of those who trade using carry trades.
Features to consider
Besides the fact that the yen ranks third among all world currencies in terms of trading volume, it is also a reserve currency for a number of Asian countries. Only the Chinese yuan can compete with the yen here, Japan is characterized by an active trade balance. This means that the export of goods exceeds the import by several times. However, the country has a public debt, and its population is aging. the bulk of the debt is domestic, meaning Japanese investors accept low return on investment. This aspect should be taken into account when analyzing.
When the dollar is unstable, most traders prefer to work with the yen. It is a kind of safe haven currency.
Guided by all of the above factors, you can build your own trading strategy, which will allow you to make significant profits when trading with Japanese yen.