Thanks to low tax rates, substantial economic freedom and a private sector dominated system, Japan continues to be the largest economy in Asia and the second largest in the world.
The currency of Japan is the yen. It is the third most-traded currency in the foreign exchange (forex) market, next only to the Euro and the US dollar. It is also widely used as a reserve currency, next only to the US dollar, the Euro and the pound sterling. Japan’s central bank, the Bank of Japan, is the only issuing authority for the yen.
The value of the yen was fixed to the US dollar in 1949. The exchange rate of ¥360 for US$1 remained constant till 1971,when the US discarded the gold standard. The US imposed a 10% surcharge on all imports from Japan, which encouraged the Asian nation to adopt a floating exchange rate system in 1973. The Japanese government continued to intervene, however, in the forex market to control the value of the yen. Despite this intervention, the yen steadily gained ground against the US dollar.
Stock trading in Japan takes place in the Fukuoka Stock Exchange, Hercules Stock Exchange, JASDAQ Securities Exchange, Nagoya Stock Exchange, Osaka Securities Exchange, Sapporo Securities Exchange, Tokyo International Financial Futures Exchange (TIFFE) and Tokyo Stock Exchange.
Of these, the Tokyo Stock Exchange is the largest exchange in the country. It is also the world’s fourth-largest stock exchange, with US$6,476 billion worth of shares traded in 2007. As of December 31, 2007, 2,414 companies, with a market capitalization of $4.3 trillion, were listed on the Tokyo Stock Exchange. Stock markets in Japan are strictly regulated by the Japanese Financial Services Agency (JFSA).
Japan has several exchanges for commodities, of which the Tokyo Commodity Exchange (TOCOM) is the largest. It has also acquired the reputation of being the second-largest commodity exchange in the world for futures and options. TOCOM specializes in crude oil, gas oil, gasoline, kerosene, gold, silver, platinum, aluminum and rubber trading. Other popular exchanges in Japan are the Central Japan Commodity Exchange and Tokyo Grain Exchange.