Yen Hits 19-Year Low: How to Make the Most of the Yen's Weakness

A South Korean office worker, identified as A, is searching for a winter vacation destination. While Europe is appealing, concerns about long-distance travel and local conditions are daunting. The high costs of traveling to the United States are also a barrier. As a result, A has chosen Japan, where the flight time is short and the yen has recently dropped to its lowest value in 19 years, making it an attractive option for budget-conscious travelers. With the yen's depreciation, how can travelers fully capitalize on this opportunity?
 
The weak yen is a boon for investors and travelers, although it poses challenges for export companies. The ongoing depreciation of the yen has sparked increased interest in travel to Japan and yen investments. According to the Bank of Korea, the average exchange rate for the won against the yen from October 1 to 16 was 849 won per 100 yen, marking the lowest level since December 2007. As of November 5, the exchange rate stood at 846.75 won per 100 yen.

Spending by South Korean tourists in Japan is also on the rise. The Japan National Tourism Organization reported that South Korean tourists spent 293.8 billion yen (approximately 2.49 trillion won) in the third quarter of this year, a 45.8% increase compared to the same period last year. The average expenditure per tourist was 113,959 yen (about 960,000 won), reflecting a 13.4% increase during the same timeframe. The yen's weakness has reduced the travel cost in won, enhancing the appeal of visiting Japan.

Funds are also flowing into yen deposits at banks. As of October 15, the combined balance of personal yen deposits at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached 265.62 billion yen, an increase of 11.6 billion yen from the previous month. This is the highest level since November 2024 (271.5 billion yen). The ongoing yen depreciation has driven demand for currency exchange for travel as well as investment seeking potential currency gains.
 
One of the simplest ways to take advantage of the weak yen is to secure yen when the exchange rate is low. Even if there are no immediate travel plans, purchasing yen now can be beneficial for future use. For instance, if the exchange rate is 900 won per 100 yen, acquiring 100,000 yen would require 900,000 won, but at 850 won, it would only cost 850,000 won, saving 50,000 won.

Investors can also engage in currency trading, known as "currency tech" (a combination of currency exchange and investment). This involves buying yen when the exchange rate is low and converting it back to won when the rate rises to realize profits. Using a foreign currency account allows individuals to hold yen and exchange it at their preferred time. However, it is crucial to consider exchange fees and purchase rates when selecting a foreign currency account. Even if fees are waived when buying foreign currency, they may apply when converting back to won. If yen was purchased at 900 won per 100 yen, the current rate of around 840 won still results in a loss. Profits can only be realized if the exchange rate exceeds the initial purchase rate.

It is also important to note that yen deposits offer minimal interest income. Most yen deposits at commercial banks have interest rates around 0%, meaning there is virtually no interest income compared to dollar deposits and other financial products. Keeping a large sum in yen deposits for an extended period may result in missed opportunities for interest income from other financial products.

For those planning to travel to Japan with the cheaper yen, using specialized cards can also be beneficial. The Shinhan Card "SOL Travel J Check" offers discounts of up to 50% on purchases at Don Quijote, capped at 20,000 won per half-year, if certain spending thresholds are met. The Hana Card "Travel Log+ Credit Card" provides a refund of 10,000 won for purchases over 100,000 won at Don Quijote and Uniqlo until April 14 of next year.

Experts recommend exchanging yen in multiple transactions, as accurately predicting the lowest exchange rate is challenging. For travel-related exchanges, it is advisable to base the amount and timing on actual usage, while for investment purposes, one should consider the potential losses from declining exchange rates.