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This chapter examines the impact of common elements that have been the driving forces in the transformation of stock markets in developed countries since the 1980s, long before the term FinTech was coined. The authors examine factor investing and high-frequency trading (HFT) as examples of the impact of digitization and increasing trading speed. They discuss how they have transformed the current state of the stock markets in Japan and the rest of the world. First, factor investing, although developed in both research and practice from the 1990s to the 2000s, has lost its effectiveness since the Global Financial Crisis. The authors confirm that what has happened in the Japanese market in this regard is broadly consistent with what has happened abroad, particularly in the US. Second, regarding HFT, three characteristics of HFT in Japan are identified: a dramatic increase in trading value share, a stronger aspect as a liquidity consumer that trades using supplied liquidity rather than as a liquidity provider that offers limit orders in advance, and a high ability to earn trading profits. Regarding the second point, the comment in this chapter, “Changes in Liquidity in the Japanese Stock Market” (Wataru Ohta), points out that the liquidity of the Japanese stock market, measured by the effective spread, has been declining since the 2000s and that it has become difficult to make profits by providing liquidity.

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The Japanese Stock Market in the Twenty-First Century: New Market Environment Shaped by Digitization and Automated Transactions

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  • 发表日期：

    2025年

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  • Tokuo Iwaisako,
  • Masahiro Yamada

摘要

This chapter examines the impact of common elements that have been the driving forces in the transformation of stock markets in developed countries since the 1980s, long before the term FinTech was coined. The authors examine factor investing and high-frequency trading (HFT) as examples of the impact of digitization and increasing trading speed. They discuss how they have transformed the current state of the stock markets in Japan and the rest of the world. First, factor investing, although developed in both research and practice from the 1990s to the 2000s, has lost its effectiveness since the Global Financial Crisis. The authors confirm that what has happened in the Japanese market in this regard is broadly consistent with what has happened abroad, particularly in the US. Second, regarding HFT, three characteristics of HFT in Japan are identified: a dramatic increase in trading value share, a stronger aspect as a liquidity consumer that trades using supplied liquidity rather than as a liquidity provider that offers limit orders in advance, and a high ability to earn trading profits. Regarding the second point, the comment in this chapter, “Changes in Liquidity in the Japanese Stock Market” (Wataru Ohta), points out that the liquidity of the Japanese stock market, measured by the effective spread, has been declining since the 2000s and that it has become difficult to make profits by providing liquidity.