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How to trade stock CFDs in Japan?

Stock trading is gaining popularity in Japan, as the first online discount stockbroker, Yahoo! Securities Japan Co., Ltd., began to offer online trading services using a simplified system for retail investors.

In the past, only those with considerable financial knowledge had access to this investment tool—but that has changed as two of the largest banks in Japan have introduced more straightforward methods of buying and selling stocks through their online brokerage services.

Regulated and unregulated

In Japan, there are two types of markets: regulated and unregulated. The regulated market is where large corporations and investors trade stocks and bonds, and the regulator is the Japan Exchange Group (JPX).

The uncontrolled or unregulated markets are known as OTC (over-the-counter) markets, and there are no clear rules regarding buying and selling. 

It is not an issue for those who make deals with each other, but it can be difficult for outsiders such as financial institutions to monitor transactions in these markets.

CFD

Those who are not familiar with CFDs are contracts that allow you to invest in an asset without actually owning it. You need to predict whether the price of that asset is going up or down and then choose to go long (betting on the price rising) or short (betting on the price falling). 

If you guess correctly, you benefit from the rise (or fall) of the stock/index/commodity/etc.

What are the things to do before trading?

Before beginning to trade in Japan, several documents have to be prepared. They are:

  • Open a bank account for overseas remittance (in case you don’t already have one)
  • Apply for an identification number (i.e., social security/ pension number)
  • Apply for your residential address tax code (in Japan) (This is not mandatory, but it makes tax filing easier when traders make money on their trades.)

Is it possible to use other banks?

Yes, but you will need a guarantor in Japan, and we do not recommend that option. We would only recommend this method for those who want an overseas account and can wait until they settle down in Japan. (It may take 1-3 years.)

Who should be my guarantor?

Your guarantor must have an address registered at the same ward as yours. If you stay at a hotel, your Japanese landlord can act as your guarantor. 

However, if you are staying with friends or family members, ask them first whether they would be willing to provide such services as a guarantor. 

Otherwise, someone already living in Japan with a Japanese address can be your guarantor.

That’s why we don’t recommend active trading in Japanese CFDs unless you maintain a minimum cash balance of $5k to cover potential losses.

Do I have to wait until I am a resident of Japan before opening an account for overseas remittance?

No, you don’t have to wait until you get a permanent address in Japan before opening an account for overseas remittance. 

However, please note that the process might take some time because your bank will need time to check with your guarantor, so it is better to choose someone who lives in the same ward as yours. (Note: If your guarantor does not offer their residential address tax code, attach one of their bank statements instead.)

Like any other country in the world, there are rules and regulations when trading CFDs stocks in Japan. There are some steps you need to take before trading overseas stock CFDs in Japan.

In conclusion

To further protect yourself when trading Japanese Stock Index CFDs, keep in mind these additional common-sense rules:

  • The more spread-sensitive the instrument (i.e., when spreads are wide), the lower position size you should take when trading. It will help moderate downside risk.
  • Never add to a losing position (it only compounds your losses).
  • Don’t hold anyone’s position overnight (the risk of loss is too high).
  • And of course, don’t trade when you’re intoxicated.

Link to Saxo for more information.

 

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