Japanese Yen, cash and investment

donny donny on 23/12/2023 - 11:10
Last edited 24/12/2023 - 09:24

hi All,

background story:

  • i am planning to visit Japan for the first time in May next year.
  • looking at the current exchange rate, the current rate is very much one of the best since 2007 and 2014.

the case:

  • i would like to exchange $30k aud to jpy. i will get approx 2.9 mil JPY
  • use approximately 500k JPY for the trip in May and retain the balance of 2.4 mil JPY
  • i would like to keep this 2.4 mil JPY and sell it once the exchange rate is providing favourable profit.

the question:

  • what platform should i do the above transaction? should i open a commsec/interactive brokers fx account? or best to just keep the actual bank notes?

I also need to consider the loss of interest compared to just holding AUD and park it in BOQ/ING

Edit 1: the purpose of this exercise is to minimise the damage from the trip. However, after doing some numbers I don't think it worth to do after factoring the opportunity cost. Anyone with different views are welcomed in the conversation 😊

Edit 2: added a missing 'fx' word on my original question.

Thanks in advance :)

Financial

Comments

  • mskeggs on 23/12/2023 - 11:20
    +3

    I’m not clear why you are buying 3m yen for a 500k holiday.
    If you want to make foreign exchange trades, handling cash would be a crazy way to do it.
    And what leads you to believe the exchange rate will be more favorable in future? It could be many years.
    Your post feels a bit like, I’ll just buy share when they are cheap and sell when they are high, duh!

    • askbargain on 23/12/2023 - 11:29
      +13

      you don't understand the big brain here

      him spending 500k JPY is going to stimulate the Japanese economy so much that he is guaranteed a profit

      • Jimothy Wongingtons on 23/12/2023 - 11:43
        +1

        69,420 iq move

      • Thrift on 23/12/2023 - 13:48
        -1

        May next year is "donny donny 2024". They'll clean up the streets, build new venues, showcase their culture. Ganbatte!

      • donny donny on 23/12/2023 - 17:15
        +1

        How is my 500k JPY is going to stimulate anything? I don't get it?

    • donny donny on 23/12/2023 - 17:14

      Spot on mate, I have been doing share trading for about 20 years and i usually in seek for shares that have been unreasonably punished by the market.

      I am then come across this weak JPY and my instinct was to get some yen while it's on its low. They might raise interest rate sometime next year and their currency will be getting stronger. I haven't done any fx trading in my entire life so that's just my armchair opinion..

    • HeWhoKnows on 24/12/2023 - 10:42

      Perhaps your unwanted opinion but doesnt really answer OPs question

      The short answer is OFX and XE

      https://www.xe.com/

      https://www.ofx.com/en-au/

  • garetz on 23/12/2023 - 11:32
    +3

    When they say historically the jpy is the cheapest it has been since 2007 and 2014, that is vs the us dollar not the aud.

    30k aud to 3 mill yen is basically parity.

    For you to benefit from buying yen and holding on to it, would mean the usd goes down vs yen and the yen also strengths vs aud at the same time.
    That's a pretty big gamble.

    • Jimothy Wongingtons on 23/12/2023 - 11:43
      +2

      Might as well park it in Lego sets if we talking gambling

      • garetz on 23/12/2023 - 11:44
        +1

        all currency exchange is gambling unless you know the future.

      • donny donny on 23/12/2023 - 17:26

        Needs more learning on this one but I have heard some great stories with Lego investing 👍

    • donny donny on 23/12/2023 - 17:20

      Hmm looking at aud jpy, it seems that the rate has never been as good as today with the exception of in 2007-2008 and 2013-2014 (at that time, 1 aud worth in excess of100jpy). So with the view of BOJ might increase interest rate in the year ahead, isn't it a good time to get some JPY? I have never done any fx trading so any insights is highly appreciated 👍

      • dcep on 23/12/2023 - 21:44
        +1

        I have never done any fx trading so any insights is highly appreciated

        https://www.youtube.com/watch?v=3V7XklEC1Qk

        Worth the 50 minutes watch for education if not for entertainment.

        • donny donny on 23/12/2023 - 22:56

          cheers for the link mate.

          i kudos to them who make a living by day trading, isnt easy and require undivided attition.

          even more challenging with FX, the market can spin literally 24 hours, 6 days a week! depending on which currency they are trading

  • Hybroid on 23/12/2023 - 11:49
    +1

    Open a wise.com account, open a JPY sub-account, transfer funds with best exchange rate, order a digital & physical card. Have fun. Transfer whatever funds remaining after trip back to AUD.

    • donny donny on 23/12/2023 - 17:20

      Will look into it, thanks mate

      • Bargain-er on 24/12/2023 - 07:53

        What i did when travelling to Japan was to use my Revolut wallets to hold both AUD and JPY. When the exchange rate was favourable I exchanged AUD to JPY. I also think I d like to hoard more JPY for future travelling but not 30k worth tho haha

        • donny donny on 24/12/2023 - 09:29

          Thanks mate, I have seen some revolt deals here on ozb will learn more onto it.

          Yeah I don't think 30k is a wise move. Might ended up costing more damage to the bottom line than just the holiday alone 🤣

  • JIMB0 on 23/12/2023 - 12:32
    +1

    It sounds like you are trying to make money trading foreign currency rather than simply locking in the price of your holiday.

    • donny donny on 23/12/2023 - 17:21

      Hahaha the missus is really keen on the holiday while I'm seeing it as a big waste of money. Hence I'm thinking on how to minimize the cash outflow 😅😅😅

  • freefall101 on 23/12/2023 - 12:34
    +1

    looking at the current exchange rate, the current rate is very much one of the best since 2007 and 2014.

    That it's currently favourable compared to historical means absolutely nothing at all. It's based far more around the fact Japanese interest rates are still low and inflation hasn't hit them as hard, whereas other countries have had to raise rates significantly to counter - that means it's far better parking money in countries where you can earn more interest. Essentially, it's priced into the currency already by those making long term interest rate predictions with a lot more information than you have. Also you don't do it in cash, because that earns zero interest.

    Plus if we hit another mining boom (let's say in lithium) and everyone is buying AU minerals, you're going to lose big time.

    • donny donny on 23/12/2023 - 17:25

      Thanks for your input mate.

      If BOJ increased the interest rate, wouldn't it mean the yen will get stronger? In this case, best to get JPY before it's increase?

      I completely agree with mining. I hold most of my investments in asx and hoping au mining will get stronger 💪

      • freefall101 on 23/12/2023 - 18:18

        In this case, best to get JPY before it's increase?

        It's best to get in before anything increases, sure, but that's how you wind up being talked into investing in a gold prospecting company or snake oil, the promise of getting in before everyone else.

        But what makes you think it's going to increase? Did you read any of the articles around about Japanese inflation yesterday? I don't want to give flat out investment advice (mostly because I'm not allowed to) but are you absolutely sure on this bet of yours that it will go up or is it just a gamble based on past trends?

        • donny donny on 23/12/2023 - 18:29

          Hmmm, core inflation easing in Japan? Easing inflation means there is less requirements (if any) to increase rate.

          I also read that the hedge funds has started to reduce their short contracts https://nz.finance.yahoo.com/news/shorting-dollar-gaining-fa…

          I understand the general idea of fx although haven't done any fx readings so still very green on this.

          The idea is trying to minimise cash outflow from our Japan trip 😅

  • ihbh on 23/12/2023 - 15:33
    +1

    You would be doing the reverse of the Japanese Yen carry trade, where investors borrow in a low interest currency (it's close to 0 in Japan) and invest in a high interest currency (e.g. AUD or USD).

    I also need to consider the loss of interest compared to just holding AUD and park it in BOQ/ING

    Yes, your cost is the opportunity cost of earning zip in Yen, excluding any transaction costs. E.g. if you had a loan for on an investment property, and you put the funds here, you could effectively be making, that is, saving, 6%. You can find other ways to maximise the interest you earn.

    As Japan emerges from deflation, interest rates will rise, and hence the Yen, but probably by not much to make it worthwhile and unlikely to be 5% p.a.

    Note also that you are thinking of a trade that is the direct opposite to what many pros/hedge funds are undertaking. In any case, they need people like you to have a market.

    • donny donny on 23/12/2023 - 17:34

      Fair assumption mate. It still on a big "IF" (i.e. if BOJ increase rate, JPY will get stronger). If 1 aud drop to 80-85 jpy, the reward is exceeding 5% for sure. But again some fees to best in mind..

      And thanks for pointing out that the hedge funds are betting against the JPY, I'll suss it out further. I am thinking it's almost certain that their cash rate will increase just a matter of how much…

  • Benoffie on 23/12/2023 - 19:04
    +1

    Personally I would not be shifting to Yen unless planning on living in Japan.

    As someone pointed out, against the $AUD, it's at parity with any benefits on the ground coming from living costs and tax rorts.

    Considering the recent property boom in Tokyo and the government's flagging on a crack down and potential taxation restructure to close said loopholes around duty free and foreign property investment, having large volumes of cash sitting in a Japanese bank but not being able to spend it in country/or more limited, is silly.

    If the above also starts to come in as Japan starts to prioritise young Japanese couples and families to live in Tokyo, then they may start more isolationist or conservative policies to achieve this.

    That could impact on foreign investment, especially out of China and that could impact rates. Im not convinced Japan is going to magically bounce out of the Covid dip, or, if it does, in the manner others expect.

    • donny donny on 23/12/2023 - 20:37

      Cheers mate, appreciate your input on this matter

  • Drakesy on 23/12/2023 - 19:26
    +1

    OP doesn't realise Australia's interest rates are likely to stay higher for longer increasing the strength of the Australian Dollar.

    It's not likely to start decreasing until late 2024-early 2025 by which time the AUD might have become even stronger.

    But hey, it's your money.

    • donny donny on 23/12/2023 - 20:41

      Well aware of it mate, have boq and ing account with the outlook of joining judo for their term deposit but was thinking of minimizing the damage of Japan holiday via taking advantage of weak JPY.

      Did a few calcs but it seem like worthwhile anymore, after considering the fees and opportunity cost.

  • knasty on 25/12/2023 - 08:14

    If you want to play currency movements use FX derivatives, not physical cash.

    • donny donny on 25/12/2023 - 16:19

      yeah, may look into it was just thinking a quicker way to offset some cash outflow (instead of doing a property trading), but there seems to be no easy way.

      others above have pointed out Wise and Revolut which i am yet to look into it too.

      cheers

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