The Shy and Retiring Yen

Features - February 1st, 2008

by John Wayne

Life must have been a lot easier for currency forecasters in the days of fixed exchange rates. Say it is the beginning of 1950 and the yen has been fixed from the previous year at a rate of 360 against the dollar. Pretty simple to predict that it might stay there. And for 21 years you would have been right—until 1971 in fact, the currency forecaster would have not have had too much thinking to do before confidently asserting that perhaps the rate this year might not diverge too much from, well, 360.

And at a rate of 360 to the dollar, Japan prospered. But then things became interesting and currency traders had to start earning their pay—and ever since the value of the yen has been a national obsession.

Fast-forward to 1995, and a dealing room in Tokyo. It is April 19, and the yen deals at an incredible 80 to the dollar; not a cheer to be heard, no celebration of yen strength, no feeling that this is virtue’s reward—a strong currency reflecting the incredible ability of the Japanese economy to generate enormous trade surpluses and wealth for the country. No, it is a feeling of gloom and despondency, as dealers worry about how the economy is going to survive at such an extreme currency high. And the headlines in the newspapers reflect bewilderment at what the country had done do deserve this punishment—“Business heads fearful of rising yen”, fearful being a complete understatement for the panic which was gripping high places.

No matter that queues were forming outside banks as salary men and office ladies, pensioners and students, dashed to buy the once mighty dollar at an all time cheap price. No, official Japan is addicted to and obsessed by a weak yen; never happier than when the yen trades cheaply against the dollar, Euro and now the Yuan. Finance ministry officials are measured by their success in keeping the yen cheap—remember “Mr. Yen”, Eisuke Sakakibara, whose hold over the markets was legendary. One of his successors, too, achieved immortality by having to do precisely nothing to keep the yen cheap, not intervening in the markets at all during his stint in the hot seat. A job almost as challenging as those post war currency forecasters.

But occasionally things do not go according to plan. 1995 was one of those occasions—in the aftermath of the Kobe earthquake, insurance companies were selling their dollar assets to meet claims at home, adding to international pressures for Japan to do something about its moribund economy. In 1998, it was the turn of a Russian default and hedge fund collapse to stymie the best-laid plans for yen weakness. And last year’s international financial pandemonium saw a dramatic move for the yen against its old sparring partner, the dollar.

So what happens next? If only we had fixed exchange rates I might be tempted to try a prediction. But while there are old forecasters and bold forecasters, there are few, if any, old and bold currency forecasters. Currency markets are graveyards of well-thought out, lucid, rational, well-argued, beautifully structured views on what must surely happen. It rarely does.

Part of the reason lies in the sheer number of people with interests in currency values. Exporters want a cheap yen and have had it for the last few years. Japanese tourists going overseas want just the opposite but rarely get it. And in the mythology of the markets, it is Mrs. Watanabe, the Japanese housewife desperate to put her prolific savings to use, who is investing overseas looking to augment the meager returns available domestically, who is now one of the biggest players in the markets. So frightening is she that hedge funds— hose macho types who strike fear into every other market participant—back down as Mrs. W puts her money to work. And what Mrs. W needs is the same as what Japan’s exporters need—a weak currency, and, so that she can sleep at night, one which does not jump around too much.

But it is not that simple. Mrs. W wants a weak currency. The exporters want a weak currency. It should all be so easy—keep quiet and the rest of the world might not notice and everyone wins. Such a role comes easily to the shy and retiring yen, which rarely struts its way on the international stage, never seeking the limelight, never begging to be bought. No, the yen is the quiet currency of the international markets. Its problem is that sometimes those international bullies pick on it and insist that it show its mettle—and when it does, it is time for Mrs. Watanabe to go on holiday.

How to.. and Where?

Weekender answers some of the most regularly questioned banking issues.

Where can I withdraw funds from my Western credit/debit card?
The post office has this service but the most convenient option is 7-Eleven bank, which allows you to access your funds back home with the added bonus of the instructions being in English.

As a foreigner am I eligible for a credit card in Japan?
Most banks offer Japanese credit cards for foreigners. Contrary to popular belief, you won’t be refused a credit card purely on the basis of being non-Japanese. In order to apply, you will need a bank account, a form of ID, and your employment information. While the criteria for accepting or declining an application is not divulged, it can be assumed that your work situation factors high in the decision. A 22-year-old, fresh-off-the-boat English teacher’s application may not be looked upon so favorably, however, an expatriate that has transferred here with a multi-national company is more than likely to find their application accepted.

I need to send some money home. What is the best way to do this?
GoLloyds Overseas Remittance Service is a fast, convenient, and inexpensive way to send funds back home. Simply use any bank ATM or internet banking in Japan to transfer the funds domestically to your GoLloyds account. GoLloyds then completes the overseas remittance for a reasonable service fee of ¥2,000. See or call the customer service number on 03-3589-7745 for more details on how to set up a GoLloyds account.

Banks and post offices offer a similar service, but at a much higher cost (around ¥5,000).

Is it wiser to exchange money here before I go on vacation, or better to take yen and exchange when I get there?
Generally it makes no difference to change here, however banks generally take a bigger commission on other currencies so it is advised to exchange travelers checks in this instance.

Where can I change currency in Tokyo?
You can exchange money at most banks across Japan, but, the variety of currency is limited. While you are likely to be able to buy popular currencies such as USD and GBP, you would surprisingly struggle to pick up currencies such as the Yuan and Won.

The World Currency Shop on the 5th floor of Roppongi Hills Tower stocks most currencies and is conveniently open 11am–7pm Mon–Fri, and 12pm–5pm on weekends and holidays.

Do any banks here have Western staff?
Tokyo Mitsubishi UFJ Azabu branch has an incredibly helpful American teller on staff.