Electronic FX in Japan: The evolution of retail FX in Japan

The e-FX market in Tokyo has grown steadily over the past 12 years, since the first e-FX survey was published by the Bank of International Settlements, back in 2013. Globally, e-FX accounts for nearly 60% of the $7.5trn daily volume in the FX market, as per the 2022 report.

In Tokyo, the ratio has risen from 20% in 2006 to around 50% in recent years, which is slightly below the global average. However, the ratio is significantly higher (70%) for spot and forward transactions.

The fact that the e-FX ratio is slightly lower than the global average can be attributed to several factors, according to a report from the Bank of Japan (BoJ) published in March 2025. These include the differences in attitude between Japanese and foreign financial institutions but also the composition of market participants.

Japan’s retail FX market is arguably not as robust as is it has been in the recent past but what factors are influencing its growth and evolution? According to Hiroaki Nagakura, Head of Prime Services – Japan at 26 Degrees, competition in the market and the popularity of FX trading should nevertheless ensure that volumes remain high.

“It can be said that the Japanese retail FX market has entered a maturity phase after a period of strong growth, following a shakeout of FX brokers due to intensified competition in the last ten years,” says Nagakura.

“Having said that, FX trading remains a popular financial product, due to the speculative aspect of highly leveraged trading, and the investment aspect of earning swap points by trading high interest-rate currencies. For this reason, I believe trading volumes in FX will continue to be high going forward.”

FX brokers will therefore have an important role to play in maintaining healthy trading activity. “To support these volumes, brokers are increasingly providing user friendly trading infrastructure such as automatic stop-loss functions and smartphone applications that allow 24h monitoring of margin and positions,” says Nagakura. “Furthermore, in terms of service, competition among brokers has led to tighter spreads and improved swap points, allowing clients to trade in a more favourable environment.”

Brokers and other institutional firms in Japan are also investing in technology and trading services demanded by retail and private investors, which includes the use of smartphones, says Nagakura. “According to research by a major Japanese broker, 70% of retail clients use smartphones for trading. Providers are therefore focusing on the UI/UX of their smartphone applications. Going forward, in pursuit of further differentiation, I believe that trading and margin management using AI, as well as algorithmic trading, will be introduced.”

Brokers are also having to cater for the growing number of high-performance trading firms and hedge funds active in the Japanese FX market. “High performance trading firms in Japan are seeking speed, transparency, and flexibility equivalent to that offered by overseas prime brokerage services,” says Nagakura.

To sum up, the following are the types of technologies and trading services particularly in demand by these regional firms:

• Low-latency, high-throughput trading infrastructure. With a trading server located in TY3 (as well as NY4 and LD4), and pricing constructed from locally connected liquidity providers and data vendors, 26 Degrees is committed to delivering low latency pricing across all asset classes.
• Margin trading using not only cash deposits but also securities collateral and Letter of Guarantee.
• Integrated risk and margin management across multiple asset classes.
• An incident free trading infrastructure, and prompt and appropriate incident management in the event of an incident. 26 Degrees’ trading solution aims to provide this, with a robust multi-site solution with hot-hot backups for data and execution routing across all data centres for optimal resiliency and redundancy.

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