Binary Options Trading in Japan
Japan is recognized as a leading financial trading hub in the ASEAN region. Tokyo is used as a reference point for Asian financial markets. Forex and binary options trading are very much alive in Japan, and unlike in many places where the regulators tend to be reactive, the Japanese regulators of the financial markets have made their mark by being very proactive in their duties.
Long before regulators in other jurisdictions began to take some actions to safeguard binary options traders from the unwholesome practices of certain scam brokers, the Japanese regulators rose up to the challenge and put in place measures to protect Japanese traders. These will be discussed in this article.
Japan’s binary options market is regulated by the Financial Futures Association of Japan (FFAJ). Every binary options broker in Japan is expected to be licensed by the FFAJ, as well as comply with specific recommendations of operation in the offering of binary options to consumers.
By regulation, all FFAJ-regulated binary options brokers are to comply with the following:
- Issuance of cashbacks and bonuses as a means of incentivizing traders is prohibited.
- All binary options brokers in Japan are prohibited from offering any binary options contracts that are less than 2 hours in expiration. By this mandate, short term options (30 seconds, 60 seconds, 2 minutes, 5-minutes, 15 minutes, 30 minutes, 45 minutes and 1 hour options) are prohibited in Japan.
- Before accepting any clients, all Japanese binary options brokers are mandated to conduct a quality examination to test the client’s knowledge of investing and binary options specifically. The examination is not to contain any questions that may provide hints on answers. The questions are also expected to wide enough in scope as to be able to test broadly, the client’s knowledge of the products being sold.
- With regards to payouts, all Japanese binary options brokers are to show trade prices based on payout amounts, and not Fixing trade prices and showing changes in value by payout amount is no longer permitted.
- Binary options brokers in Japan are expected to clearly explain how they arrive at pricing in the OTC model of binary options.
- The FFAJ also discourages the marketing of binary options by offshore brokers, as they do not offer platforms and binary options products which comply with the FFAJ regulations.
These rules were passed in 2013 and have been operational ever since. The FFAJ maintains a working relationship with the Australian and Cypriot regulators to provide information on binary options brokers in these two countries who try to market their products to Japanese traders.
As at June 2017, the monthly statistics report released by the FFAJ showed that monthly trading volume was ¥38.1 billion ($336.6 million). The fact that reporting of activities by Japanese binary options brokers to the FFAJ is mandatory shows how robust the regulation of this market is.
Currency Pairs & Spread
The Japanese Yen is the third most traded currency in the forex market. Several Yen crosses are listed for trading on Japanese binary options broker platforms. In addition, the local stock exchange, the Nikkei225, is one of the index assets listed for trading. Several news items listed in the economic news calendar (US Core Retail Sales and Non-farm Payrolls) have a strong correlation with the USDJPY currency pairs.
Japanese binary options traders have no shortage of currency pairs and assets to trade on the local platforms.
The binary options platforms used by binary options brokers in Japan are specifically constructed for the local market, in conformity with the rules and regulations set out by the FFAJ.
The issuance of bonuses to traders as an incentive to fund accounts is specifically prohibited by the Financial Futures Association of Japan (FFAJ). The FFAJ banned the issuance of bonuses as far back as 2013. Brokers who go against this directive could face expulsion from the Japanese market.
Deposit and Withdrawal Options
The localized nature of the binary options market in Japan means that local transaction options are available to Japanese binary options traders.
The following methods are available:
- Bank wires: Local bank transfers are equally used to conduct transactions on accounts.
- Digital wallets: Despite Japan’s large financial services industry, use of e-wallets for binary options transactions is not very popular. WebPay and Square are the common e-wallets. PayPal is a relatively late entrant into the Japanese market and is yet to gain a strong foothold here.
- Card Options: The use of credit/debit cards from MasterCard, VISA and JCB seems to be the overwhelmingly popular method of depositing and withdrawing funds on Japanese binary accounts.
- Bitcoin: Some Japanese binary options brokers now accept Bitcoin for transactions.
Legality & Regulations
In terms of the legal considerations and regulatory conditions attached to the conduct of binary options in Japan, some binary options platform providers such as Tradologic, had to develop new platforms that were in conformity with the FFAJ rules. Some of the top binary options brokers in Japan use these platforms while others developed theirs in-house.
Binary options trading is legal in Japan, if done within the confines of the FFAJ regulations.
Here are the frequently asked questions that most traders have about the conduct of binary options in Japan.
- Are binary options legal in the JAPAN?
Answer: The trading of binary options is legal in Japan.
- Is it safe to trade binary options in Japan?
Answer: It is very safe to trade binary options in Japan. The FFAJ regulations have been very trader-friendly.
- As a Japanese citizen, am I allowed to trade binary options with offshore brokers?
Answer: The FFAJ prohibits the trading of binary options with offshore brokers. Australia’s regulator has signed a partnership with the FFAJ to ensure that binary options brokers in both countries do not market their products to each other’s citizens across the border.
- How do I check the status of a binary options broker?
The FFAJ maintains a list of the regulated Japanese binary options brokers. Visit the FFAJ website for more information.
- Is it possible to trade the 60 seconds High Low contract on Japanese binary options platforms?
Answer: Short term options such as the 60 seconds option are prohibited in Japan.
- Can I trade the One Touch option?
Answer: The High/Low options are the only binary options allowed on Japanese binary options platforms.
Best Binary Options Brokers in Japan
As described earlier, only binary options brokers with a physical presence in the country, and registered/licensed by the FFAJ are allowed to do business in Japan. Presently, there are 11 licensed binary options brokers in Japan. From this list, we have selected the best binary options brokers in Japan for you.
The evolution of binary options in Japan has been very rapid, thanks to the proactive nature of the FFAJ. The FFAJ quickly recognized the impact of financial market deregulation and improved technology on creating a globalized financial market structure, learned from the Asian currency crisis of the mid-90s, and responded to create a stable environment for Japanese traders.
As it stands, the Japanese binary options market is built by the Japanese, for Japanese binary options traders.