A Trader's Introduction to the Yen 
A Trader's Introduction to the Yen
by InformedTrades
Video Lecture 47 of 61
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Date Added: May 7, 2017

Lecture Description

www.informedtrades.com/46764-trading-japanese-yen-part-i.html


Japan has the second largest economy in the world behind the United States, and an economic history that is the starting point for understanding the fundamentals of the Yen. The first thing that it is important to understand from a fundamental standpoint about the Japanese economy, is that unlike the United States, Japan has very few natural resources. As a result of this, prior to World War II, Japan had a large military force, which it used to occupy Korea, Taiwan, and parts of China. The country saw this as necessary, because of the vulnerable position that its lack of natural resources would have otherwise put it into.

Like with Europe however, World War II, set the country back considerably from an economic standpoint, as according to wikipedia.org, 40% of its industrial plants and infrastructure were destroyed. While no one would obviously wish for that type of destruction, there was actually a silver lining in this for the Japanese Economy. As so much of their infrastructure had been destroyed, this gave the Japanese the ability to upgrade it significantly, ultimately giving them an edge over victor states, who now had much older factories.

After World War II the United States occupied Japan, which resulted in the building of a democratic nation, that was dominated by industry, instead of the military. As the Japanese were now putting all of the focus, which had before been put into the military, into rebuilding their industries, they were able to not only match their pre war production levels by 1950, but surpass them. In the decades that followed Japan proved very competitive on the international stage, and its economic growth in the 60's, 70's and 80's has been described as nothing short of astonishing.

If you were around living in the US during the 80's, you can probably remember the envy and fear among the US population, that Japan was quickly going to overcome the United States as the world's economic power house.

While I don't think there is any question that the quality of Japanese products and services has remained very high since the 80's, unfortunately Japan's economy derailed in the early 1990's, culminating in the busting of one of the most famous asset price bubbles in history.

In the decades following World War II the Japanese population had one of the highest savings rates in the world. As more money was being saved, this meant there was more money available for investment, making access to credit much easier than it had been in the past. As Japan's economy was and still is an export oriented economy, the value of the currency also went up dramatically during this time. The combination of a strong economy, easy access to credit, and a strengthening currency made Japanese assets especially attractive.

As its economy seemed unstoppable, and newly wealthy Japanese saved more and more money, much of that capital flowed into the stock and real estate markets. As you can see from this chart the stock market roared through the 1980s, almost quadrupling in value in 5 years. In the most expensive districts, according to wikipedia.org, real estate prices reached as high as $139,000 per square foot.

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From the high of the stock and real estate markets in 1990, both markets made a slow and painful decline. It took until 2003 for the stock market to finally bottom, down from a top of around 39,000 to a bottom of around 7600. According to wikipedia.org, prices for the most expensive commercial real estate properties stood at 1/100th of their pre bubble bursting peak, and $20 Trillion in wealth had been wiped out in the stock and real estate markets.

While this may seem like a history lesson that is not relevant to traders, as we will learn in tomorrow's lesson, the affects of Japan's asset price bubble on the Yen are still being felt today, and therefore an understanding is necessary to know how today's market will react to different fundamental events.

Course Index

  1. An Overview of the Forex Market
  2. The Difference Between Over the Counter (OTC) and Exchange-Based Markets
  3. Who Really Controls the Forex Market?
  4. The Role of the Retail Forex Broker
  5. How Central Banks Move the Forex Market
  6. How Banks, Hedge Funds, and Corporations Move Currencies
  7. A Breakdown of the Forex Trading Day
  8. Forex Trading - Characteristics of the Main Currencies
  9. Setting Up Your Forex Trading Software
  10. Forex Trading - How to Read a Currency Quote
  11. Forex Trading - Understanding Currency Rate Movements
  12. Forex Trading - Understanding the Bid/Ask Spread
  13. How to Place Your First Forex Trade
  14. How to Determine Your Position Size in the Forex Market
  15. Forex Trading - Pips and Fractional Pip Pricing
  16. How to Calculate Forex Trading Profits and Losses
  17. An Introduction to Leverage in Trading
  18. How Trading on Margin Works
  19. How to Calculate Leverage in the Forex Market
  20. How to Calculate Leverage in the Forex Market Part 2
  21. How to Place a Market Order in the Forex Market
  22. How to Place a Stop Loss and Take Profit Order in Forex
  23. How to Place A Pending Entry Order in the Forex Market
  24. How Rollover Works in Forex Trading
  25. How Rollover Works in Forex Trading Part 2
  26. Free Forex Charts Userguide
  27. What Moves the Forex Market? - Trade Flows
  28. How Capital Flows Move the Forex Market
  29. The Current Account: How Forex Traders Can Use it to Identify Opportunities
  30. Interpreting the Capital Account and Measuring Capital Flows
  31. Fundamentals that Move Currencies - Balance of Payments
  32. How Interest Rates Move the Forex Market Part 1
  33. How Interest Rates Move the Forex Market Part 2
  34. How To Trade the Carry Trade Strategy Part 1
  35. How To Trade the Carry Trade Strategy Part 2
  36. How To Trade the Carry Trade Strategy Part 3
  37. Fundamental Analysis Vs. Technical Analysis in Forex
  38. Forex Trading Fundamentals Quiz - Test Your Knowledge
  39. Why the US Dollar is Still King
  40. Determining the Fate of the US Dollar
  41. Determining the Fate of the US Dollar Part II
  42. Determining the Fate of the US Dollar, Part III
  43. Economic Releases that Move the US Dollar
  44. A Trader's Introduction to the Euro
  45. A Trader's Introduction to the Euro, Part II
  46. A Trader's Introduction to the Euro, Part III
  47. A Trader's Introduction to the Yen
  48. A Trader's Introduction to the Yen, Part II
  49. A Trader's Introduction to the Japanese Yen, Part III
  50. A Trader's Introduction to the British Pound
  51. A Trader's Introduction to the Swiss Franc
  52. A Trader's Introduction to the Canadian Dollar
  53. A Trader's Introduction to the Australian Dollar
  54. A Trader's Introduction to the New Zealand Dollar
  55. Why Choosing a Forex Broker is so Confusing
  56. Choosing a Forex Broker: Regulation and Financial Stability
  57. Choosing a Forex Broker Part III: Transaction Costs
  58. Choosing a Forex Broker, Part IV: Technology & Add-ons
  59. Choosing a Forex Broker: Evaluating Customer Service
  60. An Introduction to Forex Capital Markets (FXCM)
  61. An Introduction to DailyFX Plus

Course Description

This 61-video series is an introduction and in-depth look at the forex market, including how to place trades, the fundamentals of the forex market, profiles of the main currency pairs, and factors to consider when choosing a forex broker.



This is a continuation of The Basics of Trading course by Informed Trades.

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