Today, Japanese investors can buy US shares in many different ways. The two most common methods are through stock brokerages and directly purchasing them from the American Depository Receipts (ADR) market.
Japanese investors who use a stock brokerage choose between buying stocks on margin and trading stocks short. These account types require margin deposits, which allow the investor to borrow money from the brokerage to purchase more stock than they have cash for at that moment.
A margin account is regulated similarly in both Japan and the USA. Still, these accounts entail high risk because they allow investors to make speculative investments with borrowed money. Short selling also entails risks such as exponentially increasing losses if the stock price rises.
Stock brokerage accounts require setting up the account, opening a foreign currency trading account with Japan’s top bank, and other fees to get started.
It is possible to trade US stocks in Japan using a broker that acts as an intermediary for cross-border funding into and out of margin accounts.
Still, these options are available only to wealthy investors who operate within specific legal frameworks.
Like any language, you can write numbers differently depending on which country you’re dealing with.
Different countries’ financial regulators have different interpretations of how they should handle money, so there may be slight differences between what you hear here and what is true if you go through an intermediary or set up an account at home.
The most important thing to understand about trading stocks is simply this: the price of shares can sometimes go up or down. You don’t want to sell your shares at a loss.
These traders are called “day traders” in Japan, and they have an extreme buy-and-sell strategy that involves high risk to earn money quickly.
An investor with knowledge of advanced trading strategies might do okay day trading US stocks in Japan.
Still, many risks are involved, so it’s not recommended for people with little experience in the market.
For these reasons, Qmee suggests individual investors should minimize transaction fees when buying US stocks by opening a brokerage account within their country of residence.
American Depository Receipts
Japanese investors can purchase American shares through the ADR market. The process is similar to trading UK stocks in Japan, except for a few added steps as listed below:
- Open a foreign currency account with a bank
- Have your broker send requests to buy US shares from their custodian bank3. Receive and deposit certificates of ownership from the custodian bank4. Sell those shares using the same steps as before!
ADRs are a legal framework that allows foreign companies to issue stock that trades on other countries’ exchanges without first registering with each country’s regulatory agency.
Many large corporations have issued ADRs in Japan, including Apple Inc., Ford Motor Company, and other familiar names you can find on the major stock market indices.
ADR brokerage accounts are typically designated to individual investors, so they often have lower transaction costs than standard brokerage accounts.
However, you can only purchase ADRs through a bank, which means an investor must have enough money set aside at all times to purchase new shares without incurring fees for closing out positions or opening up new ones.
As you can see, there are many ways to buy US stocks in Japan, depending on how familiar you are with stock trading and what kind of time commitment you’re willing to make. Newer traders might want to start by opening an account near the home.
The process is easier and more convenient before moving into less accessible venues that require more work but offer additional benefits.
How to trade US stocks in Japan?
Today, most foreign investors trade US stocks in Japan through the standard brokerage account method.
Traders outside the USA might find it easier to open a brokerage account at home because there are more readily available options with lower fees.
If you do not have money set aside for trading within your own country, consider opening an international trading account denominated in Yen with a top Japanese bank.
Day traders looking to make quick profits from small price fluctuations should be cautious when dealing with US stocks in Japan.
The fast nature of this type of transaction requires advanced knowledge to avoid significant losses due to illiquidity or market manipulation.
For these reasons, Qmee highly encourages new traders to trade US stocks in Japan before jumping into the market.
For more information, link to Saxo Bank US Stocks.