How to take advantage of the weak yen
As you may have heard around you, the yen has already been at a record low for a long time. It appears frequently as a news term and is commonly used, but many people may be confused about the value of money being cheap or expensive, such as ‘weak/strong yen’. Is a weak yen good or bad? We looked at specific examples to find out what it means when the value of the currency we use on a daily basis goes up or down, how it is beneficial to think about it, and how to look at changes in the prices of things in the long run.
Many people were probably surprised by the news that Japan’s GDP (Gross Domestic Product) has fallen to fourth place in the world. For those who remember strongly from their youth that Japan was second only to the USA, this is news that can be described as shocking.
But this is not simply because Japan’s national power has fallen, but rather one of the main reasons for the decline in the value of Japan’s money.
The GDP for 2023, announced by the Cabinet Office on 15 February 2024, is USD 4.216 trillion. The average exchange rate for this year is 141.56 yen to the dollar (TTS); if GDP is converted into Japanese yen, it amounts to JPY 596.5 trillion.
By the way, the current depreciation of the yen is estimated to have started around March 2022, and the average exchange rate in 2021 was 110.8 yen to the dollar (TTS). 2021 GDP was USD 5.37 trillion, which translates into JPY 554.41 trillion in Japanese yen. In other words, GDP has decreased significantly in dollar terms, but has increased in Japanese yen terms.
Should I deposit dollars because of the weak yen?
It may be difficult to imagine the impact of exchange rates on something as large as GDP. Take bank deposits as an example.
Suppose, for example, that you convert a deposit of 1 million yen into dollars when 1 USD = 100 yen. For simplicity’s sake, let’s assume you don’t consider exchange fees, which would be USD 10 000. If you convert it to yen, you would gain 1.5 million yen, which is a profit of 500 000 yen.
The terms “yen depreciation” and “yen appreciation” may not seem to fit, but it is easier to understand when you consider that the dollar is moving. The basic rule of thumb for everything is to buy when it is cheap and sell when it becomes expensive. Right now, the yen is weak and the dollar is high. No one would buy if they knew it was expensive.
Exchange rates are high-risk, high-return
Below is a chart of the exchange rate for the last two years or so. It looks as if the yen has been gradually rising (weakening) in a series of jagged movements.
This shape is called a ‘triangle holding’. A large move is expected at the apex of the triangle.
However, it is difficult to read whether the price will move upwards or plummet downwards. In foreign exchange in particular, it is very difficult to read ahead in the charts, as governments sometimes intervene in the market. In the end, it is often more profitable to receive a reliable interest payment.
By Admin|2024-02-28|News Release,|