The ongoing depreciation of the yen has prompted individuals and businesses in Japan to expand their foreign currency assets.
According to a report by the Nihon Keizai Shimbun (Nikkei) on August 21, the Bank of Japan's statistics show that the balance of foreign currency deposits at domestic banks reached 26.1 trillion yen (approximately $227.8 billion) in the second quarter of this year (April to June), marking an 18% increase compared to the same period last year. This increase of 3.9772 trillion yen is the largest since foreign currency deposits were fully permitted in 1998.
Even accounting for the rise in the yen's value against the dollar, the actual balance of foreign currency deposits has significantly increased.
Notably, the growth in foreign currency deposits among individuals has been particularly pronounced. In the second quarter, individual foreign currency deposits amounted to 6.7 trillion yen, an 8% increase from a year earlier. Traditionally, Japanese individuals tended to buy undervalued foreign currencies when the yen was strong, but recently, there has been a trend of converting assets into foreign currencies like the dollar, even amid a weak yen.
In addition to deposits, investments in overseas securities have also expanded. As of the end of March this year, Japanese households held 46.4618 trillion yen in overseas securities, a 23% increase from the previous year.
Corporate foreign currency deposits have seen an even larger increase. In the second quarter, the balance of foreign currency deposits held by companies reached approximately 19.3 trillion yen, a 22% increase from the same period last year.
Analysts suggest that expectations of continued yen weakness are driving the expansion of foreign currency assets among individuals and businesses. Tsuyoshi Ueno, a senior economist at the Nissay Research Institute, explained, "The strong outlook for continued yen depreciation is leading export companies to hold off on converting their dollar earnings into yen."
* This article has been translated by AI.
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