How to trade the Japanese stock market

Jitanchandra Solanki Oct 25, 2023 16 Min read

Did you know that the Japanese stock market is the third-largest in the world? The Tokyo Stock Exchange is home to some of the biggest and well-known companies in the world such as Toyota, Sony and Panasonic. Wherever you are in the world, the ability to access and trade Japanese stocks has never been easier and the potential opportunities they could provide should no longer be ignored.

In this article you will learn:

The reasons why Japanese stocks are exciting traders right now and why the Bank of Japan has been indirectly buying them too.
Why traders use CFDs (Contracts for Difference) to trade long and short on Japanese stocks and others.
What influences Japanese stock market prices.
The best trading platform to view the price of stocks from global stock exchanges including the Tokyo Stock Exchange.
How to use the FREE Trading Central Technical Insight indicator provided by Admirals UK Ltd to find top Japanese stocks.
How to start trading the Japanese stock market through a FREE demo trading account to practice your skills in a virtual trading environment.

What is the Japanese stock market?

The Japanese stock market is essentially an auction place where investors from all over the world can buy and sell shares in Japan's publicly traded companies. The stock market is controlled and regulated by the Tokyo Stock Exchange - much like the New York Stock Exchange which helps investors buy and sell publicly listed companies in America.

While the New York Stock Exchange and the Nasdaq Stock Exchange (both in America) are the two biggest in the world (by market capitalisation of its listed companies), the Tokyo Stock Exchange (TSE) is the third-largest. It was founded in 1878 and is now owned by the Japan Exchange Group which was formed from a merger between the Osaka Securities Stock Exchange and Tokyo Stock Exchange in 2013.

Source: Statista

As you can see from the table above, the Japan Exchange Group operates the third-largest stock market in the world based on the market capitalisation of its listed companies. As of 1 January 2021, there were 3,753 companies listed on the exchange. Some of these are well-known global brands such as Toyota, Nissan, Sony and Casio.

While most of the well-known Japanese stocks will be in the automotive and electronics sectors, there are many other companies from different industries such as chemicals, foods and retail. This is shown from the monthly report from the Japan Exchange Group's website which details the shares listed by market capitalisation and industry sector:

Source: Japan Exchange Group

To view the top Japanese stocks that are available to trade with via Admirals, you can download the MetaTrader 5 trading platform for FREE and follow the steps in the next section. To start your download now, simply click on the banner below:

How to view the top Japanese stocks

Once you've downloaded your FREE MetaTrader 5 trading platform provided by Admirals, you are one step closer to investing in Japanese stocks. To see which companies are available to trade on, follow the steps below:

Open the MetaTrader 5 platform provided by Admirals.
Open the Market Watch column by using the View menu at the top of the platform or by pressing Ctrl+M on your keyboard. A list of market symbols will now open on the left side of the platform.
Right-click on the Market Watch window and select Symbols. Alternatively, press Ctrl+U on your keyboard.
A window will open which details all the instruments available for you to trade on. Click on Stock CFDs and then Japan (TSE), as shown below.
This will then add the symbol to your Market Watch window. You can then drag and drop the symbol onto the chart.

Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admirals (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.

From here, you can see a list of all the Japanese stocks you could trade and invest in. These include stocks from a variety of sectors such as:

Top Japanese consumer electronic companies like Canon, Casio, Panasonic, Sony, Fujitsu, Toshiba and Nikon.
Leading Japanese car and bike manufacturers like Toyota, Nissan, Honda, Mitsubishi and Yamaha Motors.
Other recognised companies such as SoftBank, Asahi, Bridgestone, Kikkoman and Nintendo.

You can also view the different Japanese stocks available to trade on and invest in via Admirals through the Admirals Contract Specification page, as shown below:

Source: Admirals Contract Specification

Before we look at what moves Japanese stocks and the tools traders use to make decisions, let's first look at how to start investing in Japanese stocks.

How to invest in Japanese stocks

With the Admirals Trade.MT5 account you can trade share CFDs (Contracts for Difference) of publicly listed Japanese companies. This means you can speculate on rising and falling stock prices. This type of account is useful in volatile markets where share prices may often go up and down.

To buy or sell Japanese stocks in the MetaTrader 5 trading platform, open the platform and select the correct instrument you wish to trade on. Once this has been done, the next step is to open a trading ticket, as shown below:

Right-click on the chart.
Select Trading.
Select New Order, or press F9 on your keyboard.
A trading ticket will open for you to input your entry price, stop loss and take profit levels and unit size (volume).

Through an Invest.MT5 account you can buy physical shares of 195 different Japanese companies. This is mainly for longer-term investors looking to hold positions for weeks and months, if not years. If you are considering investing in Japanese shares or would like to invest in other stocks and ETFs from around the world, the Invest.MT5 account offers:

The ability to invest in thousands of the best stocks and ETFs from 15 of the largest stock exchanges in the world.
Open an account with just €1 minimum deposit and invest from just $0.01 per share with minimum transaction fees of just $1 on US stocks.
Receive free real-time market data, with no delays, at no extra cost.
Create a stream of passive income by collecting dividend payouts.
Use the world's most popular multi-asset class trading platform, MetaTrader 5.

You can get started right now by clicking the banner below and enjoying all of the features above and more!

What influences Japanese stock market prices?

There are a variety of factors that affect the Japanese stock market. One of the biggest influences is the actions of the Bank of Japan which are described below.

The Bank of Japan and the Japanese stock market

At the beginning of 1990, the Japanese stock market crashed sending property prices crashing 87% lower. The Bank of Japan cut interest rates from 6% to 0.5% by 1995. Dubbed the 'lost decade', many believed the economy had grown out of its 20-year long slump. However, the 2008 financial crisis sent its economy collapsing with more pain added on from the Covid-19 outbreak in 2020.

In 2012, Shinzo Abe, Japan's Prime Minister, began a programme of reform called Abenomics. Part of the plan was to start quantitative easing to lower the value of the Japanese Yen to make exports cheaper (which accounts for a huge portion of Japan's income) and to help businesses grow, along with the economy. Unfortunately, the plan failed to revitalise the economy.

Now the Bank of Japan is trying something different - attempting to raise stock prices in the hope it will increase consumer spending in the economy. The bank has been buying assets such as exchange-traded funds (ETFs) which hold publicly listed companies in an attempt to lift stock prices. They are now one of the biggest holders of stocks listed on the Tokyo Stock Exchange and is now one of the top five owners of 81 different companies.

Below is a chart of Japan's Nikkei 225 stock market index which is a price-weighted index of the top 225 companies listed in the First Section of the Tokyo Stock Exchange:

Source: Admirals MetaTrader 5, JP225, Monthly - Data range: from 1 May 2005 to 10 May 2020, accessed on 10 May 2020 at 12:15 pm GMT. Please note: Past performance is not a reliable indicator of future results.

From the long-term, monthly price chart above it's clear to see the fall in overall stock prices during the 2008-financial crisis, the stagnation until 2013 before the rise higher until 2019. Using the trend of the overall index can be a useful first step to time when to buy or sell individual shares and can fit well within a trader's overall trading strategy and methodology.

A Japanese stock market trading strategy

Trading strategies are very useful when trading the financial markets. This is because it helps the trader make more structured trading decisions using a consistent methodology. In essence, it helps to streamline the decision-making process which helps to avoid emotional and rash trading decisions. There are two common types of analysis in a strategy:

Fundamental analysis. This involves analysing the bigger economic picture, as well as company-specific data. As Japan's stock market has been supported by the Bank of Japan, traders will often track any significant policy changes from them. As most of Japan's income is heavily reliant on manufacturing exports, this analysis could also involve keeping track of manufacturing data announcements, as well as the Japanese Yen.

Technical analysis. This analysis involves the study of patterns on a company's share price. Traders will often use drawing tools to help identify repeatable chart patterns, as well as use technical trading indicators for clues on possible turning points in the market. The combination of fundamental and technical analysis can be very powerful.

Admirals does provide a useful resource to help combine your own fundamental analysis and automated technical analysis. The Trading Central Technical Insight™ indicator provides actionable technical analysis for a wide variety of asset classes including some dual-listed Japanese stocks!

If you haven't yet downloaded the Trading Central indicator you can do so by upgrading your MetaTrader 5 trading platform provided by Admirals to the Supreme Edition completely FREE! Click on the banner below to download it today:

As the indicator helps to provide technical analysis of stocks and other asset classes, it can prove useful to first have a fundamental idea of what sector or industry you want to trade or invest in. For example, you may think that automakers may struggle in a tough economic environment. You can then focus on bearish technical setups on Japanese automakers like Toyota or Honda. Alternatively, many traders simply choose to focus on technical analysis.

In either approach, strong risk management principles are essential. Markets go up and down and you can win or lose. It is important you understand what your overall risk is on a trade. You can use the Admirals Trading Calculator to help identify your risk and margin requirements for different instruments (if trading via CFDs).

To start using the Trading Central Technical Insight™ indicator, open your MetaTrader Supreme Edition trading platform. You can learn more about the indicator in the 'How to Trade with Trading Central' article. For now, let's search for a top Japanese stock such as Sony Corp:

A screenshot of the MetaTrader 5 Supreme Edition trading platform provided by Admirals showing the Trading Central Technical Insight™ indicator for Sony Corp.

You may find that some Japanese stocks are listed on other exchanges around the world. Dual-listed stocks are quite common for some of the most well-known companies in Japan.

In the Technical Insight™ window above, it provides short-term (2 - 6 weeks), intermediate-term (6 weeks - 9 months) and long-term (more than 9 months) trading ideas first. Below that section, is a list of Active Events which are technical based events from price action trading patterns and certain technical trading indicators. In Sony Corp's case, there are 24 different technical events happening (at the time of writing this article).

If a trader had an overall bullish outlook on Sony Corp's stock price due to strong economic conditions leading to consumers spending more money on things like electronics, they may choose to click on one of the short-term bullish events. For example, by clicking on the Weekly Momentum event, it opens up to an explanation of the technical event, as shown below:

A screenshot of the MetaTrader 5 Supreme Edition trading platform provided by Admirals showing the Trading Central Technical Insight™ indicator for a Sony Corp technical event.

It explains the technical event on Sony Corp's weekly price chart and provides some educational content on the indicator being used which in this case is the momentum technical trading indicator. Users can also see the indicator and price chart in the window but may also check the longer-term, monthly picture by using the normal price chart of Sony Corp's stock price in the MetaTrader trading platform provided by Admirals.

Source: Admirals MetaTrader 5, #6758.JP, Monthly - Data range: from 1 July 2008 to 10 May 2020, accessed on 10 May 2020 at 13:15 pm GMT. Please note: Past performance is not a reliable indicator of future results.

In the above monthly price chart of Sony Corp's stock price, it's clear to see the uptrend that began in 2013. The red line is a 50-period exponential moving average. This indicator helps to identify the trend of the market. If the price is above the moving average and the line is also moving higher it indicates that overall there are more buyers in the market, causing many traders to find opportunities in line with this trend. This analysis combined with the information from the Technical Insight™ indicator can help to form a disciplined trading methodology.

Why trade the Japanese stock market with Admirals?

Trade and invest with a regulated company which includes regulation from the UK Financial Conduct Authority.

Benefit from a negative balance protection policy to help protect you from adverse movements in the market.

Gain FREE access to the fastest and most popular online trading software, MetaTrader, for use on PC, Mac, Web, Android and iOS operating systems.

Open an Invest.MT5 investing account to buy stocks and ETFs from 15 of the largest stock exchanges in the world.

Open a Trade.MT5 trading account to trade via CFDs (Contracts for Difference) in order to go long and short a market to potentially profit from rising and falling markets.

Gain FREE access to the Trading Central indicator through the feature-rich MetaTrader Supreme Edition provided by Admirals.

Get started today by opening a free demo trading account so you can trade in a virtual trading environment until you are ready to go live!

About Admirals

Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or recommendation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.