Often denoted with the symbol ¥, JP¥, or JPY, the yen is the official currency of Japan. It was established by the New Currency Act of 1871 to restore a common currency in Japan and do away with the various feudal currencies in circulation then. Since the Bank of Japan was founded in 1882, it has been the only institution mandated with printing the currency and controlling its circulation.

The Japanese yen futures is very popular among currency futures traders. It is the third most-traded currency in the world, after the U.S. dollar and the euro. The currency is also widely used as a reserve currency, being the fourth most-held currency after the United States dollar, the euro, and the Great British pound.

Japanese Yen Futures Contract Specifications
Symbol
JY
Exchange
CME
Tick Size
$6.25
Contract Size
12,500,000 Japanese yen
Contract Months
Mar, Jun, Sep, Dec
Trading Hours
Sundays: 5:00pm – 4:00pm CT//Monday – Friday: 5:00pm – 4:00pm CT the next day. Closes at 4:00pm on Fridays
Settlement
Deliverable
Last Trading Day
The second business day before the third Wednesday of the contract month

What Is the Japanese Yen Futures Contract?

The Japanese yen future is a financial derivative contract in which the underlying asset is the Japanese yen, with its pricing based on the expected exchange rate of the Japanese yen to the U.S. dollar in the future. In other words, the Japanese yen futures is a tradable agreement to receive or deliver a specified amount of Japanese yen on a future date, at an already agreed exchange rate.

Just like all other futures contracts, the Japanese yen futures are standardized and trade on the futures exchanges — one of the key features that distinguish the currency futures market from the USD/JPY spot forex market, which operates over the counter. One major benefit of trading on an exchange is that the trading activities are well regulated, unlike the spot forex market, where the broker can trade against the trader.

It is important to note that the Japanese yen futures contract is a leveraged instrument. So, a trader would only need to deposit a portion of the total worth of the contract to be able to trade the contract. The minimum amount required to carry a contract is known as the margin, and it varies with the marketplaces, market conditions, expiration of the contract, and the type of contract (full or micro contract).

At the end of each trading day, the clearinghouse of the exchange settles all the traders’ accounts with the profits or losses made on that day. Traders whose accounts are below the maintenance margin would be required to top up their accounts to be able to keep their contracts.

If you are interested in trading the Japanese yen futures, all you need is to create an account with the exchange and deposit the required margin. Being a leveraged instrument, you need not have the full dollar worth of the contract to start. However, be cautious about futures trading — while you can easily make money, you can also lose more than you invested.

Why Trade Japanese Yen Futures?

There are many reasons to play the Japanese yen futures market, and they include the following:

Hedging: Investors, fund managers, and any business person, who is exposed to Japanese yen exchange rate risks, may use the Japanese yen futures to hedge their exposure to the market.

Speculation: The majority of the traders in the currency futures market are there for speculative reasons, and the Japanese yen futures contract offers a great opportunity for speculation.

Arbitrage trading: Currency arbitrage traders may simultaneously buy and sell the Japanese yen contract on different marketplaces so as to benefit from any imbalances in prices.

How do Japanese Yen Futures Trade?

The Japanese yen futures are traded on the Chicago Mercantile Exchange (CME) Group. Through the Globex electronic trading platforms, the contract can be traded from any part of the world Sundays to Fridays from 5:00 p.m. to 4:00 p.m. CT the next day, with a one-hour break each day. The only exception is Friday when the market closes by 4:00 PM and reopens on Sunday by 5:00 PM.

One Japanese yen futures full contract is equivalent to 12,500,000 Japanese yen. The price quotation is in U.S. dollars, and the minimum price fluctuation is as follows:

  • Outright fluctuation — $0.0000005 per JPY increment or $6.25 per contract
  • Consecutive months spread — $0.0000001 per JPY increment or $1.25 per contract
  • All other spread combinations — $0.0000002 per JPY increment or $2.50 per contract

Aside from the full contract, the exchange also offers micro contracts on the Japanese yen futures, and they are equivalent to 1,250,000 Japanese yen. For the full contracts, there are quarterly contracts (March, June, September, and December) listed for 20 consecutive quarters and serial contracts listed for 3 consecutive months.

Trading terminates at 9:16 a.m. CT on the second business day immediately preceding the third Wednesday of the contract month (usually Monday). If the stated date for termination is a bank holiday in Chicago or New York City, then, trading shall terminate on the next preceding business day common to Chicago and New York City banks and the Exchange.

At expiration, the contract is settled by physical delivery of the specified amount of Japanese yen. This is usually done on the third Wednesday of the expiring month. If that day is a bank holiday in either Chicago, or New York City, or is not a business day in the country of delivery, the delivery shall then be made on the next day which is a business day in the country of delivery and is not a bank holiday in Chicago or New York City.

Japanese Yen Trading Strategies

Japanese Yen Trading Strategy

Japanese Yen Trading Strategy

Being a liquid market, the Japanese yen futures are well suited for building trading strategies. In fact, we ourselves have quite a few trading strategies that we trade right now, and while the market may not be the easiest to find a trading strategy on, it’s possible if you just put in some work!

If you’re interested in getting edges for a variety of markets, you should check out our edge membership. Members receive new edges every month.

Japanese Yen Seasonality

Here is a seasonal chart of the Japanese Yen market:

Japanese Yen Seasonality

Japanese Yen Seasonality

Factors That Affect the Japanese Yen Futures

Many fundamental and technical factors can affect the Japanese yen futures, but we will focus on the fundamental factors, which include economic reports and political events.

Economic data: The reports with the highest impact on the Japanese yen futures market include the following:

  • Monetary policy reports, including interest rates and policy statements
  • Inflation-focused reports, such as the consumer price index and the producers’ price index
  • Growth reports, such as the GDP, manufacturing PMI, services PMI, and retail sales
  • Reports about the balance of payments, such as current account and trade balance reports
  • The Tankan survey, an economic survey of Japanese companies issued by the Central Bank of Japan

Political events: Serious political events, such as elections and land disputes with China, can have significant effects on the Japanese yen futures.

Conclusion

The Japanese yen futures trades on the CME and its Globex electronic trading platforms. It offers investors and foreign businessmen a way to hedge their exchange rate-exposed obligations, as well as provides traders with the opportunity to speculate on the Japanese yen.