[Practical Finance] Golden Holiday Japan Travel and Historic Yen Weakness... Should You Invest in the Yen?

From this Chuseok holiday until early next month, more people are planning trips to Japan ahead of the golden holiday period. As the yen depreciation trend continues, the demand for travel to Japan is rising, and the activities of those engaging in currency exchange investment (hwan-tech, a combination of exchange rate and investment) by accumulating Japanese yen are also becoming more active. The balance of yen deposits at major commercial banks is also on the rise.

Record-Low Yen Drives Increase in Yen Deposits

According to the financial sector on the 27th, the balance of yen deposits at the four major commercial banks (KB Kookmin, Shinhan, Hana, and Woori) reached 993.2 billion yen, an increase of 39.5 billion yen (4%) compared to the end of last month (953.7 billion yen). Compared to the yearly low at the end of April, this represents a 72% increase (414.4 billion yen).

The increase in yen deposits appears to be driven by demand seeking foreign exchange gains based on the weak yen. The Bank of Japan (BOJ) is the only central bank maintaining negative interest rates while other major central banks such as the Bank of Korea and the U.S. Federal Reserve (Fed) continue tightening monetary policy. The BOJ’s monetary easing policy has sustained the yen depreciation trend. The KRW/JPY exchange rate, which was around 970 won per 100 yen at the beginning of the year, rose to about 1004 won at the end of April, then continued to decline, reaching the 898 won level on the 18th, and recorded about 904 won as of 2 p.m. the previous day.

The increase in Japanese travelers also seems to play a significant role in boosting yen deposits. With the end of COVID-19 and the normalization of overseas travel, demand for tourism to Japan is substantial. According to the Korea Tourism Organization and the Japan National Tourism Organization, 3,129,000 Korean tourists visited Japan in the first half of this year, accounting for 29.2% of all visitors to Japan, ranking first. Especially with the upcoming Chuseok golden holiday, more people are planning trips to Japan, which is expected to significantly increase yen demand.

Considerations When Investing in Yen

Financial industry insiders advise setting limits when investing in yen. Kim Daesu, PB team leader at Shinhan Bank’s Shinhan PWM Yeouido Center, said, "Whether for travel or investment purposes, holding yen is not a bad choice at this time, but since there is a risk that the KRW/JPY exchange rate could fall below the 900 won level, it is advisable to avoid investing large sums of money with a short-term purpose." Choi Misun, deputy branch manager at TC Premium Apgujeong Center, also said, "The KRW/JPY exchange rate may decline further within the year, so it is better to consider long-term investment over one year or more," and recommended "dividing the purchase into installments by period and amount."

Another point to consider is that yen-related investment products are not very diverse. Deputy branch manager Choi explained, "Due to Japan’s negative interest rates, both fixed deposits and demand deposit accounts offer interest rates in the 0% range, so interest gains are minimal, and investment products such as ETFs carry risks, limiting the variety of available products."

Financial Sector Offers Benefits Targeting Overseas Travelers

Marketing efforts related to Japan and the yen are also active in the financial sector, so those planning trips to Japan may find these offers useful.

Kakao Pay offers a 50% discount up to twice per person when paying with Kakao Pay at 'Bosuijo,' a complex entertainment facility in Fukuoka, until the end of the year. Additionally, users who spend more than 1,000 yen at the local convenience store 'Lawson' will receive a 100 yen discount per person (up to twice) until the end of the year.

BNK Busan Bank is also running a currency exchange event in partnership with the Japanese variety store chain 'Don Quijote' for customers using mobile and internet banking until the end of the year. Customers who purchase more than 10,000 yen at Don Quijote will receive a coupon offering an additional 5% discount on top of the existing 10% tax-free discount.

Moreover, those planning overseas travel might consider applying for the Hanacard Travelog Check Card. The Travelog Check Card is a travel-specialized card that allows charging foreign currencies usable in various countries with a 100% preferential exchange rate. It also offers benefits such as exemption from overseas merchant usage fees and free ATM withdrawal fees at local cash machines when used abroad.

Additionally, the Travel Wallet Woori Card allows users to accumulate 1% travel points on domestic spending and 2% on overseas spending. It also waives Visa brand usage fees of 1.1% and overseas usage fees of 0.3% on Travel Pay and overseas credit card payments.