Kavan Choksi Japan on the Essentials of Japanese Yen Currency for Forex Traders


The foreign exchange market is widespread, competitive, and extremely complex. Major funds, banks, and trading houses dominate this market and instantly incorporate all new information into the currency prices. So, forex trading is not a market for the novice. To trade effectively on forex, one should be thoroughly knowledgeable about various currencies. Japanese Yen is one of the most traded currencies in the forex market, whereas the rates of Yen are so difficult to predict, and any derived model can only work for brief periods of time.

Even though the domestic debt of Japan remains high, Yen is always considered a safe haven for investment. It is difficult to trade on the Yen, and it should be attempted only by the seasonal forex traders. Kavan Choksi Japan explains thatthe Japanese Yen is one of the largest currencies among the seven dominating currencies in the forex market. Japan is now one of the biggest economies in the world, featuring a high GDP among similar nations. Japan is also the largest export of goods at a global scale, in dollar terms.

One another important thing to note is that all major currencies in forex trading have corresponding central banks behind regulating them.  Like any other central bank behind any major currency, the Bank of Japan also has been mandated to act in maximizing Yen appreciation and minimizing inflation.

However, considering Japan, deflation had always been a threat to the economy for many years. In the meantime, Band of Japan tried to pursue a policy of low rates too in the hope of stimulating economic growth. This had been tried at various times in the last decade, whereas the real rates in Japan had remained slightly negative.

Forex models of Yen

There had been many theories to explain the forex rates in general. Purchasing power parity, Fisher effect, interest rate parity, the balance of payments models, etc., offer the right rate of exchange calculations based on variable factors like relative interest, price levels, etc. In common practice, all these models may not work in the real market as we expect them to. In the real market, the rates are determined by the supply and demand along with various timely psychological factors.

BoJ has maintained low rates ever since the property bubble in Japan had collapsed. The bank also got involved in the currency intervention, i.e., selling off Yen to help the exports in the country be more competitive. This mode of approach incurred many political consequences too in the past, so the bank is now a bit hesitant to intervene in the forex market.

Kavan Choksi Japan also points out that the country’s trade balance also impacts the Bank of Japan’s policies and in terms of the forex rates. While Japan remains at high debt levels, the traders used to be more comfortable with the debit balance of the country. So, Yen is very volatile in forex, which can also bring you many benefits if you get involved in trading on Yen actively and diligently.

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