As I mentioned there are many traders who just trade the USD/JPY. Unless the volatility comes back to this pair – whether by the US Fed, or elsewhere – Japanese forex brokers should think how to have their customers diversify their trading portfolio. Thus, brokers need to depart from that trend of just relying on one pair, and focus on other pairs like EUR/JPY, AUD/JPY, and GBP/JPY. Another challenge is pricing competition which is very severe in Japan. Some retail brokers offer very tight spreads, for instance .3 pips for USD/JPY but it is difficult for brokers to get steady liquidity from banks at this level. Japanese brokers have an inherent risk to warehouse. In essence, it is also simply too risky to rely on pricing competition in this country.
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From a regulatory point of view, circumstances have been constant in Japan for the past two years. Prior to 2012, the FSA and the self-regulatory body tightened leverage ratios and advertisement compliance. Some broker advertise very tight spread, but in actuality, their clients do not get the rates, instead leading to their orders are rejected or slippage. As such, the self-regulatory body monitors the spread between advertised ones and actual ones – there is a maintained standard. For example, 95% of brokers’ spreads must be equal or lower to their advertised figure. I think the FSA and other regulators have already done what they think they need to do so in this respect the environment here is quite stable.