JFSA

Japan's Financial Services Agency supervises banks, insurers and securities firms, and it regulates the largest retail foreign exchange market in the world. Japanese retail FX turnover routinely exceeds that of every other national market, and it operates under rules that are among the strictest anywhere.

Leverage

Retail leverage on currency pairs is capped at 25:1. The limit arrived in stages — 50:1 in 2010, tightened to 25:1 in 2011 — as the FSA responded to retail losses during the financial crisis, and proposals to lower it further have been debated since.

Twenty-five to one is tighter than Europe's 30:1 and far below the offshore norm. The Japanese market nonetheless grew under the cap, which is the strongest available evidence against the argument that retail traders need high leverage to participate.

Client money

Japan requires full segregation in trust. Client funds must be placed with a trust bank under a trust agreement, separated from the broker's assets by law rather than by contract, and reconciled daily with the trust bank confirming balances. This is structurally stronger than the segregation most jurisdictions require, and it survives the broker's insolvency directly.

Registration and conduct

A firm must register as a Type I Financial Instruments Business Operator and join the Financial Futures Association of Japan, a self-regulatory body that sets additional conduct standards. Capital requirements, risk management and internal control obligations follow, along with a mandatory pre-contract disclosure document in prescribed form.

Foreign brokers and Japanese residents

Soliciting Japanese residents without registration is prohibited, and the FSA publishes warnings naming unregistered firms doing so. Many international brokers simply decline Japanese clients rather than register, which is why the domestic market is served overwhelmingly by Japanese firms.

Verifying registration

The FSA publishes a register of financial instruments business operators, and the Financial Futures Association lists its members. Check both. ProForexBrokers.com treats an FSA registration as a strong signal precisely because the capital, leverage and trust requirements make it expensive to hold.