CAD/JPY pair can not be considered a widely-used pair. Its feature is low volatility. Moreover, it can be described as having a considerable level of liquidity which depends on technical traders.
The economy of Japan exceeds the Canadian three times. At the same time, it accounted for $4.87 trillion in 2019 while the Canadian one reached the figure of $1.65 trillion. It’s curious because Japan’s size is significantly smaller. The two governments are among the five leaders in import and export.
The economies of both governments are significant enough, but there are many differences in them. Canada mainly exports products, and Japan primarily deals with high tech and is made to import many natural resources, mostly from Canada.
As long as Japan can boost its financial stability, it is considered to be among the most significant safe-haven monetary units worldwide. And because Canada pays attention to products and comparatively higher discount rates, the monetary unit becomes the aim of speculative operations.
The Bank of Canada or BOC regulates the financial policy speaking of the Canadian dollar. It has to hold inflation at the level of 2%, and the midpoint within the limit of 1% to 3%.
The financial policy for the yen is ruled by the Bank of Japan (BOJ), which has to maintain the rising prices at the figure of 2% per annum. But this aim was unrealistic for an extended period because the bank supports a quantitative easing program, which takes a long time.
The BOC and the Bank of Japan meet every half a year to decide on the financial policy. That’s the best time for trading and getting benefits relying on technical indicators.
CAD/JPY is a typical profiteering pair, and it behaves respectively. Frequently this is considered to be a replacement for USD/JPY or AUD/JPY.
As long as Canada depends on commodities, there are changes in the discount rate of a rather stable yen. Along with the development of the economy, product prices rise in dollars.
This shows a search for benefits because investors look for more significant interest rates for dollars when the economy is on the rise but return to the yen when the economy is unstable.
The pair depends on the long-term bases like the economic rise of the corresponding countries, interest rates, and product costs.
Moreover, the US is the leading trading partner of these countries, so news from there can influence the pair a bit.
The pair are frequently used instead of USD/JPY when traders are cautious of the dollar and wish to trade yen. Canada mainly exports oil; that’s why its prices have an impact on the pair.
The oil impact is so relevant because Canada is a famous oil exporter and Japan imports it on a large scale.
Canada holds the fifth position in the world, speaking of producing crude oil and possesses the resources that are the second ones after Saudi Arabia and Venezuela. The most significant part of the country’s oil is oil sands.
The oil industry in the country provides jobs for more than half a million people, and money from the government equals $18 billion. As you can conclude, crude oil has a significant role in the Canadian economy. As long as Canada is a net exporter of oil when the prices jump, it brings extra value to the dollar of Canada.
Japan’s natural resources, on the contrary, provide just 10% of its energy needs. 47% of requirements are provided by oil. That’s why when the oil cost drops, it improves the Japanese economy and makes the yen stronger.