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USD to Yen just hit 140 again... (self.japanlife)

submitted by lee_ai

Here we go again...

Any ideas where it's going from here?

This is just my uninformed take so take it with a grain of salt. Personally I think Japan's economy relies a lot on tourism which is why there was a big bounce back right after tourism opened again. Nothing new about that take but my guess is that now that tourism has been open for a while the Yen will just start getting back to pre-tourism levels until Chinese citizens are able to travel here again. Then there will be another spike. Then another gradual decline.

I love Japan but looking at the culture I don't see a lot of evidence to be confident in their ability to stay competitive in the next 10-15 years with the rest of the world. They do have some unique niches but my understanding is that there is a lack of innovation and competitive cutthroatedness that encourages stagnation. There's a lot of other reasons that I won't get into right here but please remember that these are just my personal opinions.

I'm curious what everyone elses' takes are on the future of Japan's economy? I love living here but a lot of work here feels like a dead end especially when I talk to foreigners that have lived here a long time. Would love to hear some experiences/opinions to the contrary

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[–]Romi-Omi 257 points258 points  (10 children)

When you said Japan economy relies on tourism, it showed how the post is based on common misconceptions. Tourism is prob not much more than 1 or 2 percent of the economy, at most.

Japans economy is based on high tech supply chain, auto industry, finance/banking..etc. I mean name a country that’s has a economy as advance and diversified as Japan. Prob only a handful of countries at most.

[–]burgerthrow1 46 points47 points  (5 children)

When you said Japan economy relies on tourism, it showed how the post is based on common misconceptions. Tourism is prob not much more than 1 or 2 percent of the economy, at most.

Closer to 7% pre-pandemic. It was basically Shinzo Abe's obsession for the previous decade leading up to 2020 to expand Japan's foreign and domestic tourism industry to hedge against a straight import/export economy

[–]olemas_tour_guide 71 points72 points  (4 children)

That figure (~7.5% in 2019) includes domestic tourism, which accounted for more than 80% of the GDP contribution - overseas tourism peaked at less than 2% pre-pandemic. Also, international tourism should really be calculated as a net value for GDP contribution, since it's counterbalanced by your own citizens going overseas and spending their money; if you calculate according to that net value, the contribution of international tourism never topped 1%, even in 2019.

That said, revenue from overseas tourism had been growing pretty rapidly for sure - it was definitely one of Abe's major goals, but even more of an obsession for Nikai Toshihiro, who was a big "power behind the throne" when Abe was in charge and basically responsible for Suga being chosen to replace him, and was deeply involved with the tourism industry lobby. Their real obsession is domestic tourism though, and you can see that in the policy that was adopted during the pandemic - the government was insanely keen to restore domestic travel (Nikai was the main driver here too, and was basically the reason the whole Go To Travel scheme was rolled out during the pandemic) but very relaxed about the timescale for letting international tourists back in. The LDP is basically a Frankenstein's monster of stitched-together business interests, for good or for ill; if international tourism was worth 7.5% of GDP, the borders would have been open much, much earlier.

[–]RoamingArchitect海外 5 points6 points  (3 children)

That backs up my observations as well. Over all I always felt most tourists were domestic and critically those were the ones who spent more money on an individual level. While I feel the numbers of foreign tourists are higher especially in Tokyo and Kyoto compared to pre-pandemic levels, in other cities like Osaka and Hiroshima I feel they actually dropped, so the overall change is not that big I reckon.

Given how the LDP manages their economic policies, it should be no suprise that international tourism is basically a drop in the bucket. After all they just introduced the second sakoku both without considerable resistance and for an unusually long amount of time when compared to most developed countries. I always felt the domestic travel incentives were predominantly a response to the industry that arguably suffered most from their COVID policies. The tourism sector was on the brink of collapse in some regions and I would imagine that resulted in considerable pressure on a prefectural level in those prefectures that more heavily rely on tourism. These prefectures in turn could band together on the national level to try and push finance packets and travel schemes in order to revitalise the sector. You could see that some prefectures like Nagano for instance really put the money to good use: they had a portal of activities dividing the prefecture into five regions and listed all participating businesses that would accept travel vouchers in those areas. You could even filter with an extensive list of offers. That portal was way better than most websites I've seen from the tourism industry in Japan and would have never come about without the need for stimulation.

[–]olemas_tour_guide 3 points4 points  (2 children)

Over all I always felt most tourists were domestic and critically those were the ones who spent more money on an individual level.

Yeah, I think this is a big part of it - the growth in international tourist numbers over the decade before COVID was huge, but at least part of that was because of going "downmarket", with things like low-cost airlines opening up Japan tourism to people who came over with less disposable income. That's not a value judgement, I'm all for people travelling on a budget - but clearly the economics are different. It's definitely noticeable that when you eat or stay at higher-end places in Japan (with the exception of some of the really nice hotels run by international chains, like the Ritz Carlton etc.), the demographics of the guests become more and more Japanese. A lot of them drop serious cash on domestic tourism. I guess the bakugai Chinese tourists purchasing suitcases full of Shiseido were helping to counterbalance that somewhat, but even at that I'd wager that older Japanese people in particular are much, much bigger spenders when they travel than most international tourists are.

​

Given how the LDP manages their economic policies, it should be no suprise that international tourism is basically a drop in the bucket.

Honestly, I think the causality is kinda the other way around - if international tourism was a bigger deal economically, the treatment of the borders would have been very different. Japan's actual numbers from tourism aren't that far off the norm for a developed country - I just took a look at the numbers for France, which is the country with the largest number of inbound tourists every year, and their tourism industry also accounts for ~7 to 8% of GDP, and about 70% of that is from domestic tourism. It's less about these countries having underdeveloped tourism sectors and more about their overall economy being very large, so it's hard for tourism to match the activity of sectors like manufacturing, finance, agriculture, etc. - it's a drop in the bucket, but the problem isn't that the drop is small, it's that the bucket is really big. Countries that actually have a big chunk of GDP coming from international tourism tend to be those where the rest of the economy is underdeveloped.

I definitely agree about what you're saying about the crisis the tourism sector faced during the pandemic - and yeah, some prefectures have done a really good job with the funds they got. Turns out that some of the best regional revitalisation is done just by giving prefectures money to spend on the projects they deem necessary, rather than by dreaming up initiatives and making endless powerpoint presentations in government offices in Tokyo... Who knew... (It's heretical in some quarters, but I also think Go To Travel was a pretty good piece of policy in this regard - instead of making businesses apply for money, which is so easily abused and often results in failing zombie businesses being kept alive on the public teat, you give vouchers to consumers and let them decide where the funding should go through their market activity. I'm not usually starry-eyed for the invisible hand of the market, but this was a pretty solid implementation of a market approach to distributing public funds in a sector where that made perfect sense.)

[–]notrevealingrealname 0 points1 point  (1 child)

and about 70% of that is from domestic tourism.

The thing is, France has far-flung overseas territories that may be very very distant from what most people think of as France but are still considered “domestic”. Japan had to give up their overseas territories after WWII. Kind of difficult to compare their domestic numbers because of that.

That being said, I do agree with your analysis of Go To Travel.

[–]olemas_tour_guide 3 points4 points  (0 children)

Fair point, France is probably not a good point of comparison - I picked it because it's the biggest nation for inbound tourism, but it does have an unusually large number of big overseas territories (and some of them are really nice tourist destinations too - I feel like it says something about respective nations that when the French were choosing which parts of their empire to grip onto for dear life, they picked tropical paradise islands with glittering white beaches, while when the British were doing likewise, they ended up with the Falklands...).

Other examples do support the broad point that domestic tourism is the lion's share of tourist revenue in large developed nations, though - glancing at the OECD numbers for some other big European states, the UK has about 80% share of domestic tourism, and even Italy has about 60%. I don't think Japan's numbers are that unusual, or indicative of any kind of weird policy distortion by the LDP.

[–]JHT230 11 points12 points  (0 children)

International tourism at least.

Domestic tourism is and always has been much larger. It's unaffected by the exchange rate of course but does vary based on how the overall economy is doing.

[–]Bangeederlander 2 points3 points  (2 children)

Is it common? It takes a special kind of facepalm to think Japan depends on tourism. Probably the same people who think most foreigners living in Japan are English teachers.

[–]CaptainNoFriends 0 points1 point  (0 children)

Cheap yen makes it seem that way to overseas peep with stronger currency.

[–]Romi-Omi 0 points1 point  (0 children)

Oh ya definitely. I had few friends that visited say that and read comments like that on Reddit also.

[–]Bangeederlander 132 points133 points  (13 children)

Japan has an export heavy economy not a "tourist" economy. The Bank of Japan loves this. Suck for those of us who want to travel or import junk food though.

[–]parttimepanda 14 points15 points  (11 children)

The Bank of Japan can suck it. If you are a foreigner, you are probably exposed to exchange risks one way or the other. So you need to think for yourself and don't expect Japan to ever think about your situation in the slightest.

[–]c00750ny3h 27 points28 points  (10 children)

But BOJ has had the same 0 rates for nearly 30 years even when the yen was 80 to the dollar in 2010.

There isn't much they can do against speculation.

[–]gimpycpu 7 points8 points  (0 children)

Travelling would not be that bad if half the price of the tickets was not fuel surcharge (-_-;)

[–]poop_in_my_ramen 96 points97 points  (26 children)

The exchange rate is irrelevant for most people living in Japan, even foreigners if you're a long term resident. Just look at the actual reality, cost of living is reasonable and housing is super affordable. Things are pretty great.

If the economy is "growing" but a 1 bedroom apartment costs $3000/month like in Toronto, what good is it for the average person?

[–]burgerthrow1 49 points50 points  (0 children)

That seems to be a problem a lot of people on here have: reflexively comparing everything in Japan to "back home".

It's like, yeah, Japan wages are "low" by Toronto standards or the exchange rate sucks or whatever, but they're fine for living in Japan at a Japanese standard of living.

[–]senseiman 20 points21 points  (1 child)

Its not entirely irrelevant. Most of Japan's food and energy is imported from overseas, to name two examples, so the price of those things to average consumers is heavily tied to the exchange rate.

Real estate is different but even that can be effected - the lower the Yen gets the more attractive Japanese real estate becomes to overseas investors which can lead to an increase in prices here. Hasn't had much effect like that yet, but certainly could....

[–]Naomi_Tokyo 0 points1 point  (0 children)

Does it make it more attractive to overseas investors? Any returns would also be correspondingly in cheap yen

[–]Either_Factor_1499 11 points12 points  (16 children)

and housing is super affordable.

Not really. Given the shit quality of most housing here, it's a rip-off.

[–]smorkoid 5 points6 points  (1 child)

Man this sub will find anything to bitch about lol

[–]qyy98 1 point2 points  (13 children)

I'm curious what makes you say that most housing here is "shit quality?"

[–]meikyoushisui 15 points16 points  (6 children)

Small, poor materials, lack of standard amenities (central AC), forced depreciation makes it a money sink

[–]qyy98 19 points20 points  (2 children)

forced depreciation makes it a money sink

This is the best thing about Japanese homes imo, housing should not be considered an investment. I'd argue that the way housing is handled in North America is much worse with an affordability crisis and homes way bigger than what most people need. This is one of the main reasons I came to Japan, I don't want housing to be an investment nor do I want a massive place. Larger homes are also harder to take care of with more to clean and easier to end up accumulating more stuff when you "have the space" for it.

The only negative I can find is the typical lack of insulation... the poor material/construction is half true, but the lack of maintenance and deceiving statistics skews the numbers.

Even a postwar wooden house should last 65 years on average with proper maintenance and repairs. A concrete building built this year could easily still be standing in the year 2100. The reason for the 30-year rumor is that statistics don’t take into account buildings that are still standing. They don’t take into account the reason for demolition, such as to build a bigger, better building. They don’t take into account that Japanese owners maintain and repair their buildings far less than American or British owners. When controlling for those factors, Japanese buildings last much, much longer than the western media would have us believe.

[–]meikyoushisui 8 points9 points  (1 child)

I'd argue there's a happy medium between "your home will only ever lose value" and "home prices skyrocket and no one can afford a home" where people actually get to own things and those things keep their value over time.

[–]qyy98 9 points10 points  (0 children)

I'd argue there is not, the structure itself shouldn't be treated any differently than a car. Homes should depreciate in value and I'm glad that is the normal expectation in Japan.

The land is a different story, and at least for Tokyo land does keep its value for anyone who bought a home in the past 2 decades.

[–]Washiki_Benjo 9 points10 points  (2 children)

probably because (and I say this with no sarcasm intended) they live in cheap apartment intended for short term residents (whether tourists or new grads or someone in between) which was probably provided by company.

Also, there's a cultural thing here, too. It's simply boggles the minds of those who were raised in places where they were lucky enough to be born into and whose families were sold the whole "real estate" value can and will only go up over time.

Homes here are built to be disposable. Doesn't mean they are poor quality, they are built with a use-by date.

[–]qyy98 10 points11 points  (0 children)

Yeah, I hate the whole line must go up mantra for real-estate. This is how you end up with a bunch of NIMBYs and a homeless crises when you have more than enough empty homes to house everyone... Looking at the US and Canada

[–]PaxDramaticus 1 point2 points  (0 children)

One might argue that in a world of finite resources where climate change caused by human industry is a serious upcoming challenge, anything whose production and maintenance creates carbon and that is also built to be disposable is inherently and definitionally poor quality.

[–]Any-Literature-3184日本のどこかに 4 points5 points  (1 child)

I'm gonna go on a hunch, but no insulation pretty much anywhere, I would say.

[–]CorneliusJack 2 points3 points  (0 children)

New apartment insulation is actually pretty good.

[–]CorneliusJack 13 points14 points  (0 children)

New apartment sales in Tokyo has increased YoY 60% in the past year. It’s only getting worse.

But more expensive things would (in theory) forces company to raise the salary of workers

Source: https://www3.nhk.or.jp/news/html/20230518/k10014071361000.html

[–]BeingTimeUji 7 points8 points  (0 children)

This. Purchase price parity income is what I look at.

[–]PaxDramaticus 5 points6 points  (1 child)

The exchange rate is irrelevant for most people living in Japan, even foreigners if you're a long term resident.

Depends on where you're from to a degree. There are a likely a large number of American residents here who will be paying their college loans until they die, and for them exchange rates matter quite a lot.

Not saying that's anyone in Japan's fault, that anyone in Japan owes a fix for it, or that these people represent a majority of the immigrant resident community, but it is a reality for a large number of people.

[–]borrrden関東・埼玉県 4 points5 points  (0 children)

That and investing in Japan is a headache that is better off avoided because of US taxation rules eliminating any benefits of something like NISA so I buy dollars every month to use for investing into my portfolio as a U.S. citizen.

[–]franciscopresencia 2 points3 points  (0 children)

As someone who travels internationally 3-5 times/year, and who is unsure about retiring here, no it's not. Every year it's more expensive to travel abroad.

[–]Indoctrinator 0 points1 point  (0 children)

I’d agree that’s it’s really relevant if you’re an American who sends money to a US brokerage for investing. Maybe when IB eventually forces everyone to have a Japanese account, but still a massive loss in buying power.

[–]DoomComp 86 points87 points  (4 children)

... I see you're not an economist or even know anything about the Japanese economy, but that's ok.

First:

Japan is an EXPORT heavy economy, as in they import raw materials (because Japan has VERY limited raw materials of its own) and then sell the finished products to other countries for a profit. E.x: Japanese Car companies (Toyota, Nissan, Honda etc.) and electronics (Sony, Nintendo etc.)

Second:

The yens current weakness is mostly caused by the difference between central bank policies which are in place. Japans central bank is still using quantitive easing (Cheap borrowing, INSERTING money into market), all the while most of the world is now doing quantitive tightening (Expensive borrowing).

The BOJ's (Bank of Japan) very loose money policy (YCC - A form of quantitive easing to supply CHEAP money 『i.e NO to low Interest on loans』 to the market at large, in the hopes inflation will take off and stay at levels around 2%

This is while the US, Europe and most of the world is battling very high inflation (7~20%) and are desperately TRYING to slow down the inflation by doing quantitative tightening (Squeezing money OUT of the market)

​

Thirdly:

What you said holds some truth: it's true that the weak yen is attracting a whole bunch of tourists to Japan and that this tourist boom is generally beneficial to Japan, but at the same time because of the weak yen you need More people to equal the same amount of spending as a stronger yen would have gotten you.

Of course, something is always more than nothing so it is a good thing that tourists are coming back.

​

Damn this god long....

TL.DR: Japan is an EXPORT focused economy, therefor a weak yen has often been seen as an advantage as it can undercut other countries appeal (Japan made being cheaper)

Japans Central bank is still giving out money, while most of the world is reigning in money from the market; The difference of this is causing money to flood out of Japan and into higher interest rate giving countries, Causing a weak yen.

The weak yen is attracting many tourists (Yen weakness = Cheaper for them) while at the same time, a weak yen means that tourists spending weighs less then it would have if the yen was strong.

[–]Koufas 12 points13 points  (0 children)

Yes this is the one of the more comprehensive ones out all the comments so far

Dont even have to go into QE/QT tbh. Differentials in policy rates are already enough to explain the weakening Yen to most people

The ELI5 version for those interested:

US Fed hike rates = more people want to put money in US due to the higher interest rates. This means more demand for the USD

JP BOJ keeps rates negative = less people want to put money in JP since the returns are low. This means less demand foe the JPY

More demand for USD, less demand for JPY = depreciation

Monetary policy divergence is a common theme across some Asian economies, most notably JP, but other economies such as ID and MY with slower hike cycles (or choosing to end it early) due to weaker demand are facing these challenges too

Ueda's appointment to the BOJ was very closely watched to see if he will normalise rates for this reason

[–]Firamaster 2 points3 points  (0 children)

With a depreciated yen, there is a higher demand for Japanese goods. No sense buying a more expensive product if the Japanese product is going to be massively discounted because of the currency discrepancy. Do you think the heightened level of sales will offset the increased price to acquire the raw materials to produce said goods? (Are the sales higher than the costs?)

[–]oyo_fuku 1 point2 points  (0 children)

Great explanation. Can I ask if you think the yen will get stronger at all this summer or nah?

[–]neworleans-中部・愛知県 0 points1 point  (0 children)

can i piggy back on what you’ve said so far and ask a question on trade?

what’s your thoughts on japanese and us trade balance? are they going to start blocking jp from entering into us market? on electronics, automobile, chips?

[–]c00750ny3h 28 points29 points  (1 child)

My guess is due to the US debt ceiling issue.

If a deal is reached to allow more gov spending, more Treasuries flood the market, reducing it's value and increasing it's yield. Japan likes buying US treasury bonds.

As for Japan's long term economic prospects.... Japan seems to be on board in revitalizing it's semicon and tech industry in an attempts to wrench the marketshare away from China now that sanctions have been imposed. Unlike Europe and the USA, I think Japan actually has a chance at being successful at chip manufacturing seeing that they have the infrastructure and experience for it.

[–]tomodachi_reloaded 17 points18 points  (0 children)

Yep, the Nikkei is doing great lately, especially electronic related companies. Still, it hurts for people like us.

[–]_Kizz_ 20 points21 points  (0 children)

Personally I think Japan's economy relies a lot on tourism which is why there was a big bounce back right after tourism opened again.

You couldn't be more wrong lol... Just because Japan is a ninki tourist destination doesn't mean that the country heavily relies on tourism.

[–]Paul_Davidoff 16 points17 points  (5 children)

Tourism accounts to only 2% of GDP in Japan. In Thailand it accounts for 5.5% of annual GDP. I think your analysis isn’t very accurate here.

[–]wolvesfaninjapan 4 points5 points  (4 children)

And, like, half if that 2% isn't even international tourism; it's domestic.

[–]Paul_Davidoff 4 points5 points  (3 children)

Definitely. I would believe 40-50% is domestic.

[–]pomido関東・東京都 1 point2 points  (2 children)

Over 78% of total tourism expenditure was from domestic tourism even at the peak of inbound tourism in 2019.

[–]Paul_Davidoff 0 points1 point  (1 child)

Wow! This is crazy. Thanks for sharing. I knew domestic travel was big but didn’t know it was this big. Whenever I travel domestically I choose more affordable hotels, but always imagined typical foreigners would be able to afford luxury hotels. Looking at the numbers from the article you shared it means average spending per person would be around 1000 USD. If my math is correct. That’s not much.

[–]Paul_Davidoff 0 points1 point  (0 children)

Wow! This is crazy. Thanks for sharing. I knew domestic travel was big but didn’t know it was this big. Whenever I travel domestically I choose more affordable hotels, but always imagined typical foreigners would be able to afford luxury hotels. Looking at the numbers from the article you shared it means average spending per person would be around 1000 USD. If my math is correct. That’s not much. (Edit: I mean for inbound tourists)

[–]parttimepanda 17 points18 points  (1 child)

It's the new normal. I gave up on the idea that the ¥ will return to its highest anytime soon. If you watched the news you see that is not a minority opinion. So you need to take that loss into account when making a decision and I decided to leave. I would love to return to Japan at a better time, but will not let it in the way of my current decision.

[–]tomodachi_reloaded 2 points3 points  (0 children)

This is the sad truth, but not everyone can pack and leave.

[–]Akki8888 17 points18 points  (11 children)

As long as you earn and spend in yen, there is no need to worry I guess ? Rest all is speculation. No body knows when the ojisans at bank of Japan will start selling dollars to prop up the currency.

[–]ImJKP 24 points25 points  (1 child)

You spend in yen, but that doesn't mean prices are set in yen.

There's a reflexive coping impulse to say dumb stuff, like only imported luxury items and international vacations will get more expensive. But having a laptop and smartphone isn't luxury anymore; that's just basic middle class life. A large slice of the grocery basket is imported: Tomatoes, beef, things made from corn, avocados... And then there are hydrocarbons, which unfortunately still drive a huge part of the economy (and an input to inescapable costs like food).

Of course, anyone saving for a future overseas is fucked.

Japan needs inflation, and if inflation leads to wage growth then the national debt will become more manageable, and that's good. But the weak yen really is bad for a bunch of reasons in the lives of ordinary people; it's not just about luxuries.

[–]Akki8888 2 points3 points  (0 children)

Shrinkflation is bad.

[–]timbit87 9 points10 points  (7 children)

It just sucks for buying shit that isnt made here. I mean yeah I make and spend yen, but a new gopro is going to skyrocket in price, as they're already overvalued compared to the exchange rate here.

[–]Akki8888 -1 points0 points  (6 children)

How about the iPhone ?

[–]kansaihamburglar -3 points-2 points  (5 children)

Don’t buy an iPhone? They’re overpriced everywhere. Or if you’re so obsessed buy one used from a reputable seller.

[–]PeanutButterChicken近畿・大阪府 2 points3 points  (3 children)

Eyeroll.

Every phone is insanely priced here. Even budget phones like the Pixel 7a are almost 80,000 yen.

[–]smorkoid 1 point2 points  (2 children)

It's $500 US in the states, which is about 70k yen. You can get it for just a bit more than that off Amazon Japan. Basically same as overseas price

[–]PeanutButterChicken近畿・大阪府 2 points3 points  (1 child)

The point is, that's expensive for what should be a "budget" phone. Chinese phones are coming in at the 30,000 yen mark and for most people, they're fine.

[–]smorkoid 4 points5 points  (0 children)

Yeah but that's a Google thing, not a Japan thing is my point. Basically same price everywhere

[–]Akki8888 1 point2 points  (0 children)

Hey l like the iPhone

[–]JHT230 2 points3 points  (0 children)

Sort of, but given that virtually all oil and fuel is imported, the costs for those will rise, including domestic gas and electricity.

[–]MaxKevinComedy 13 points14 points  (0 children)

Japanese yen is the most fucked of all the modern currencies. They can never raise rates even a little because of the debt. Inflation is going to get worse and worse.

The Bank of Japan will intervene again at 150. They still have $1T in US treasuries they can offload to help the exchange rate, but the dollar is inflating as well. No fiat currency is safe. Protect yourself by buying assets.

[–]HeroicVerse 11 points12 points  (5 children)

I wonder what happened to all of the people who when we hit 120 were absolutely sure this is a temporary thing and that by next year it'll be back to the 100s again. I think some people were also waiting to convert a lot of money.

​

Anyway tourism, while valuable, is such a small part of the overall picture and demand for yen that it probably has almost no affect on the rate. There are lots of factors but the easiest to understand is that USD has high interest rates now, and the BOJ refuses to raise rates here and have made comments saying so. Makes it a lot more attractive to convert to buy USD and enjoy those interest rates.

[–]DoctorDazza 3 points4 points  (4 children)

I wonder what happened to all of the people who when we hit 120 were absolutely sure this is a temporary thing and that by next year it'll be back to the 100s again.

I think they're just as flabbergasted at what is going on as the economists are.

[–]olemas_tour_guide 7 points8 points  (3 children)

I don't think the economists really are flabbergasted, though? At least not most of the sane ones. Much as I enjoy rolling my eyes at my Econ colleagues, what's happened here (America hikes interest rates, Japan doesn't, the Yen falls hard and stays low) is pretty much first-year undergrad Macroeconomics modelling.

The people who thought this was temporary - that we'd just see a spike and things would go back to normal - were either just incredibly hopeful, or believed way more strongly in mean reversion than they should. There's no real reason things should revert to the mean when the pressures causing the change (central bank interest rates, in this case) remain constant.

[–]disastorm 1 point2 points  (2 children)

I think the people that thought it was temporary are still thinking the same thing as you, that its temporary because of the US interest rates being temporary. its just a long term temporary until they are lowered again right ?

[–]olemas_tour_guide 0 points1 point  (1 child)

Hah, yeah I guess it could just be a somewhat geological definition of “temporary” that they’re using… From that perspective, sure, once the US drops interest rates close to zero again (which will probably be more gradual and take much longer than some people are hoping), and either Japan tapers its QE program or other nations restart theirs… then yes, the Yen’s status as a safe harbour is largely unchanged so you’ll get inflows again and the currency will rise. That could be five years or more away, though, and all manner of stuff (financial crises, natural disasters, wars, etc.) could send the FX markets off in crazy directions by then. Anyone betting on the Yen snapping back to “normal” within a short enough timespan to be sensibly traded on was being very optimistic.

[–]disastorm 0 points1 point  (0 children)

oh I see, i didnt actually realize it could be 5+ years away, but anyway maybe you can tell me, I know that the increased interest rates increases the strength of a currency but I don't actually understand physically how it does that. When someone buys the currency with the higher interest rates how does that interest manifest itself to them? Is it just as simple as higher interest rates means less borrowing so overall less money in circulation, and since there is less money, supply and demand says that the value of the money increases? or is there more to it than that?

[–]_Kizz_ 10 points11 points  (0 children)

Personally I think Japan's economy relies a lot on tourism which is why there was a big bounce back right after tourism opened again.

I love Japan but looking at the culture I don't see a lot of evidence to be confident in their ability to stay competitive in the next 10-15 years with the rest of the world. They do have some unique niches but ...

You are the type of person who only learns about Japan through travel vloggers and believes that Japan is losing to China and Korea because its market share in, what, consumer electronics like TVs and smartphones is decreasing aren't you?

My dear friend, let me tell you about the concept of 'core technology', which is the true source of Japan's strength and influence on the global stage.

A lot of 'core' technology behind the production of consumer electronics, in which Japan may appear to be losing ground, is actually held by Japan itself. And these fields are not widely known to the general public. Anyone can purchase TV parts and assemble them to create their own brand of TV, but these small components/basic materials, as well as the tools/equipment and machinery for manufacturing, are provided by Japan. Japan's strength lies in their vast business-to-business (B2B) sector, where they possess a huge amount of exclusive technologies that other countries must acquire from them if they want to produce their own goods. And unlike the highly competitive market for TVs or PCs where companies often have to reduce their profit margins to attract customers, when you possess exclusive indispensable shits, you can raise the price as high as you can. That's a true gold mine right there. (Keyence is a good example. They have a ridiculously high-profit margin of above 40%, it's absurd.)

And no, these areas of expertise are not merely "some unique niches" but rather the foundation of a country's strength in comparison to others. Unless other countries figure out how to create everything from scratch, which took Japan and other advanced nations billions of dollars in research and nearly a century to accomplish, I doubt they will lose their competitive edge to the rest of the world in the next 10-15 years.

[–]ltsiros 9 points10 points  (1 child)

> Any ideas where it's going from here?

No

[–]smorkoid 3 points4 points  (0 children)

This is the best answer

[–]Khal-Pilkington 8 points9 points  (0 children)

there is a lack of innovation and competitive cuttthroatedness that encourages stagnation

Let me tell you a little story that happened yesterday. My dog peed on a woman’s leg. He was playing in the off-lead area, wandered across to this woman who noticed him. She then saw him cock his leg and piss all down her trousers. She didn’t move away, she just stood there and made a weird whimpering noise as my wife ran across to get him to stop. But too late. This isn’t the first time that has happened too. He’s young, and we’re still training him, but I’m still amazed that the woman didn’t just move away as soon as he lifted his leg up.

But that’s what happens in Japan. Even when they’re being pissed on and the solution is obvious, everyone is too paralyzed to do anything about it. So they just stand there, and take the piss.

[–]orientpear 7 points8 points  (0 children)

Japan is one of the top manufacturing nations in the world. Yes China has taken a lot of that at the lower end, and Japan has had to go to higher end segments, but they are mostly still competitive, whether it's semiconductors, optics, or automotive. This will still be a major part of Japan's future for decades.

Japan is also unique. Culturally unique, gastronomically unique, etc. and I think that will help keep it relevant for a long time whether it's trade or tourism or even agriculture.

The quality of life in Japan is quite high. Maybe not as high as some European or Scandinavian countries but certainly the highest in Asia. And as others have said, it's very affordable, certainly in comparison to most other first world nations of a similar GDP/capita.

I'd like to ask OP where s/he plans to move and what you'll do elsewhere. If you can do better elsewhere, you should probably move. I'd also ask OP where you've traveled or lived beyond Japan and your home country. Japan's not perfect by a long shot but it's quite a safe and comfortable place to live at the moment.

[–]SideburnSundays 2 points3 points  (3 children)

Any ideas where it’s going from here?

A. Economic collapse from unregulated capitalism and corruption

B. Economic collapse from declining birthrate (arguably the same as choice A)

C. Economic collapse due to climate change causing mass migration / food shortages / mass casualties

The question is just which will come first.

[–]ImJKP 11 points12 points  (1 child)

"Unregulated capitalism"?

Have you met Japan?

[–]MoboMogami近畿・兵庫県 9 points10 points  (0 children)

Japanese government never met an economic regulation they didn’t like.

[–]ConsistentSorbet1076 0 points1 point  (0 children)

Crony capitalism.

[–]fawe9374 5 points6 points  (1 child)

Optics is narrowed because you focused at the forex market.

Locals only care about the amount of inflation, in reality it isn't as high compared to many other countries. Look at the Consumer Price Index (CPI), Japan is at the lower end.

There's no need for constant inflationary growth, many countries will start to look like Japan soon due to the stagnation of birth rate. The global consumption will slow down eventually, the earlier you get to terms and deal with it the better.

[–]Ariscia関東・東京都 0 points1 point  (0 children)

Housing has been inflating for years now though. An apartment in Tokyo now costs over 1700m on average.

[–]THELOCnessmonsta 4 points5 points  (1 child)

I can’t even go back to America the way the yen to the dollar is right now. I’m so sad

[–]Ariscia関東・東京都 0 points1 point  (0 children)

No international travel for the rest of us too.

[–]bulldogdiver🎅🐓 中部・山梨県 🐓🎅 3 points4 points  (0 children)

I don't know but my Jack-o'-lantern futures are through the roof. I expect them to peak right around November 1st.

[–]rshaq99 3 points4 points  (1 child)

The long term cause of this is BOJ policy. The short term cause is the difference between BOJ and US Fed policy.

No one, not even experts, know which way the yen is headed in the next 2-4 months. Longer term, if BOJ keeps rates low and US has them higher, it is plausible yen will continue to decline. But in the next 6-12 month, NO ONE can reliably predict.

Those holding or needing to spend in or save in USD Euro or sterling can hedge risk by dollar cost averaging into the needed second currency on a monthly basis.

Prestia Bank (SMBC) and other Japanese banks offer automated ways to do this in multi-currency savings accounts.

[–]rshaq99 1 point2 points  (0 children)

In addition, if one does not need to convert to USD this moment, it is likely that conversion rate will dip back towards 135 in the next several months, though perhaps only briefly. Set up monitoring alerts. Again, Prestia SMBC online banking offers these alerts. And I presume other banks do as well.

[–]Which_Bed 3 points4 points  (0 children)

After years and years of being fucking broke I finally have enough in the bank to pay off the student loans that ruined my early adulthood and the fucking yen collapsed on me. Things could be worse but fuck

[–]Key_Preference_4594 2 points3 points  (0 children)

It’s not the yen weakening. It’s the usd strengthening. The usd is a long term short against anything now because once economy goes risk on and cuts rates, usd will fall.

On economy, japan’s economic growth will remain limited partly because its government is tired and can’t reinvigorate. Very nepotistic society at the top in politics and companies, also a lot of prohibitive taxes at private wealth level - look at the inheritance tax (most rich people heading to Singapore). China is nepotistic too but not as tired as the LDP and the GDP/capita still leaves a lot of room for growth. If China GDP went from $12k usd per person to $17k usd per person (ie how much productivity each person on average generates in dollar terms), it’s not a big ask, but that’s already enough to leapfrog another 50% and make it as big as US + Japan. You get a vicious cycle where young people feel unmotivated, they’re stuck on some crappy salary by developed country standards and prob earning less than Koreans and Chinese soon and become more demotivated (yes yes country side is still poor yes yes, but I’m talking about just the major cities added together which is already Japan’s population).

You look at something like Japan’s largest company. It’s Toyota. But Toyota already behind the 8 ball on EVs. Tesla and BYD absolutely dominating. Maybe Toyota can catch up with hybrids eventually, I doubt it’ll ever catch up on the BEV race, but point is you see how easy it is to cede market share once you’re asleep at the wheel and the Americans and Chinese continue to compete at fast speeds. Same way Sony ceded to Samsung etc. When I grew up Japanese products were amazing, certainly you feel much less about that these days.

In general though it’s obviously not that bleak, not like this is Egypt… the economy is still third in size although pales vs US and China. India is catching up and should pass it soon. For me the main issue is how do you motivate the next generation to work and if you provide the wrong incentives, if on average people know they’re making a lot less than counterparts overseas, well you lose even more talent and momentum quickly. I don’t really think the LDP which is tired and old can turn the tide. It’s a slow burn and has been for a while.

Someone mentioned semiconductors. I mean Japan is pretty low end products vs American, still not up there with your Nvdias, AMDs, ASMLs etc even though they’re all different parts of the supply chain. If anything if I’m not backing US/Taiwan, I’d bank on Chinese in this sector or some beaten company like Intel (being smashed by Nvidia) or Qualcomm (being smashed by Mediatek). Also no one’s going to stop China getting there because the Govt is with the private enterprise, they’re all in… can delay that’s all, even guys like Ray Dalio and Schwarzman have said this multiple times. Here the Govt is asleep. At the wheel. I have to look at Japanese US Chinese stocks all day and I certainly don’t think Japan about to do anything groundbreaking here.

[–]CorneliusJack 2 points3 points  (0 children)

unlike any central bank in the rest of the developed word (well maybe China), BOJ controls both ends of the yield curve, (while US just controls the short end with target rates). So what it means is they completely control the financing of the money market, and they kept the interest rate artificially low throughout. If you have money that you can park in USD or JPY, where the former earns you 4-5% a year, and latter gives you nilch. What would you choose? If you can borrow Japanese yen (while paying also the nilch rate), and then buy 1 USD at 140 JPY to hopefully earn 4-5%, would you?

And if you would, then imagine all the other Mrs Watanabe and Tanaka also doing the same with their cash/saving. Then you will see why USD got pushed up to 140, then high and higher. This is what we called “carry trade”.

Obviously it’s is no so simple (US debt ceiling crisis for e.g.) but the market sentiment is JPY low interest rate will continue despite inflation pressure. (japan import most of their raw material and energy sources from abroad, paying in JPY, low JPY means foreign goods get expensive relatively, the cost will get transferred to normal everyday goods for everyday people). BoJ new chairperson like his predecessor tend to think the inflation is a passing pain that will do good for the economy in the future, should eventually transfer to higher wages (I am not so sure, Japanese corporate culture and herd mentality is too strong for people to ask for higher wages, but maybe it will this time around?)

As for economy, Nikkei is doing great following Warren Buffet’s recent investment into Japan’s top trading houses. For precisely the same reason, even though if the stock doesn’t do great he is still buying them super cheap on strong dollar. Not to mention the hot money flowing into the country , again, because of how fucking cheap everything is.

Hopefully you have invested into the stock / housing market (average new apartment sales YoY in downtown Tokyo has broke through 1 Oku, and more than 60% YoY), cuz they are probably the only thing normal people can buy that’s relatively inflation proof.

Source: https://www3.nhk.or.jp/news/html/20230518/k10014071361000.html

Edit: as for the future. It’s anyone’s guess, most of the world is trying to decouple from China and Japan is trying to retake that opportunity, but from the supply chain crisis during corona we know that’s hardly possible in any foreseeable future. Even with Japan steel at full capacity would not meet 20% the supply of China’s steel from research report (of the internal research report of my company). Japan lacks the innovation and infrastructure of propelling them back to the top economic powerhouse and is trapped between China and US. The question is as economical as political. I would think it would improve somewhat but does not really benefit the normal day people (just like so many companies making record profit this year but you don’t hear too much about pay raise even amidst some of the worst inflation this country has seen in the last 3 decades). Japan is playing a catching up game in terms of manufacturing, they really fumble the bag especially in things like cars (everyone did e-cars and they stuck with hydrogen cell, of which I am kinda glad to see them finally come to fruition as some downtown buses uses fuel cells now, though not entirely and only as hybrid), as well as semiconductor fabrication. Kishida have a strong message of wanting to side with the G7 and take over the possible vacuum that de-Chinaization would bring, but it’s too soon to see if it is any thing concrete or just hot air.

[–]Taira_no_Masakado 2 points3 points  (0 children)

With the average tourist spending $1,321 in Q2 2018, tourism in total currently equates to approximately 0.8% of Japan's gross domestic product (GDP), although the broader impact is estimated to equal about 2.2% of GDP. And here is a graph that shows the breakdown between domestic vs foreign tourism contributions.

"Another domestic factor is the huge trade deficit. The trade deficit is  increasing amid rising resource prices due to the impact of the recent war in Ukraine. As a result, the Forex market will see an increase in transactions to sell yen and buy foreign currencies in order to make payments.

The rising prices of all commodities, including crude oil and natural gas, nonferrous metals, and agricultural products, have swelled Japan’s trade deficit. According to preliminary trade statistics for May 2022, exports increased +15.8% y/y. Imports also increased +48.9% due to an increase in crude oil, coal, and other commodities. As a result, the trade balance stood at 2,384.7 billion yen. The trade balance has been in the red for 10 consecutive months. Exports have increased for 15 consecutive months, while imports have increased for 16 consecutive months.

Japan is a country poor in resources has no choice but to import energy and agricultural products. Since the U.S. dollars are needed for imports, it is necessary to sell the yen to buy the dollar. Therefore, there is a high possibility that the yen will remain weak if resource prices continue to rise." (source)

[–]Japanprquestion 0 points1 point  (4 children)

Great to live in Japan and earn USD. Time to hedge your earning potential and start looking for ways to stop getting paid in yen.

[–]MoboMogami近畿・兵庫県 2 points3 points  (0 children)

Or sell to US based customers. I earn in yen but majority of customers are US based. Every time the yen dips it’s like a country wide sale for my customers.

[–]ArtDeco3 0 points1 point  (2 children)

What sorts of jobs pay in USD?

[–]smorkoid 0 points1 point  (0 children)

Beigun

[–]Japanprquestion -3 points-2 points  (0 children)

Consulting clients are American and I invoice them in USD, and I also do Amazon and e-commerce/digital marketing biz focused on the US market as well as some other markets. So I am 100% paid in dollars and basically live here because of family.

[–]Fucktardio_Hearn 2 points3 points  (0 children)

I’ll say it again 180 by end of year The wheels are coming off the bus and hordes of tourist, domestic or otherwise can’t fix it

[–]Educational_Hawk1236 1 point2 points  (0 children)

The forecasts I have looked at predict it to go slightly below 130 before the end of the year, slightly better than now but not by much.

[–]Undercovermother19 1 point2 points  (0 children)

The reason for The fallingyen has been the monetary easing policy of the Bank of Japan. They think that the inflation rate is currently too low so they're trying to maintain it at 2% per year. According to some comments made by the governor of the Bank of Japan it seems as though they are prepared to intervene if the rate should fall too far. Interest rates in Japan which affects the rate of exchange has been negative for the past 20 years and it seems as though because Japan has been or was going through a period of deflation then they are trying to increase the level of inflation in the economy in my view I think that they are trying to achieve it too quickly which is having a very negative consequence for the individuals living in Japan Having a very high rate of currency exchange is good for Japan because it's an export oriented economy but not so good for those of us who want to import things and Japan does import a lot of things chief among them being energy because Japan doesn't have a source of fossil fuels so all of it has to be imported and this is one of the main drivers for the high exchange rate. It leaves to be seen how the Bank of Japan will react to this increase in the next few months. Source!....................... I trade Forex markets

[–]hareyakana 1 point2 points  (0 children)

exchange rate is primarily driven by the Bank Of Japan and US federal interest rate differences. The policy differences between both agency is what driving the exchange rate you see mainly. BOJ is stubbornly sticking to its YCC measures to drive steady 2 % inflation and US is using interest rate to tame their high inflation, totally opposite of each other hence why the differences across exchange rate of japanese yen.

Japan Nikkei index recently broke its 30000 yen mark for the first time in 30 years since the bubble economy in the 1990s. From this, japan overall economy seems to be experiencing their best time in 30 years although with many asteriks. Tourism is just a small part of it and does not explain the exchange rate differences.

[–]EAGLEFLYAWAY 1 point2 points  (0 children)

I kind of agree that you said "A lot of work here feels like a dead", but tourism industry is not that heavy. The manufacturing industry weighs more than the other industry although the import is higher than the export last year.

I admitted that Japan is a great country, but somehow, the whole country is stagnant for a long time under my observation. After almost one year of job search, I'm even considering going back to my country and looking for a new chance.

[–]East_Housing5378 1 point2 points  (0 children)

Japan still dominates in fields that most people and investors think are "boring". Buttons, nuts and bolts, manufacturing robots, etc.

There's a reason why Bank of Japan doesn't ease their monetary policy, they're greedy bastards, not stupid, they know what the yen can withstand. Demands for Japanese goods are not going away anytime soon, the moat is pretty wide and deep.

[–]loso0691 1 point2 points  (0 children)

They have koreans who are literally everywhere. Japanese openly discriminate against foreign tourists tho.

[–]M4NOOB 1 point2 points  (0 children)

Damn EUR/JPY is almost at 151, I was personally hoping for it to go back to sub 140 so I can move my YEN back to EUR :(

[–]Either_Factor_1499 -1 points0 points  (1 child)

I think Japan had its Golden Age during the 80s and early 90s. Now, Japan is slowly sliding back to how it was before this Golden Age. There is nothing to halt the reverse. Sure, a few niche industries will keep doing well (semiconductor manufacturing equipment, cars etc.) but this is not enough to balance out all the crap and carry the whole economy.

Immigration may increase, but it is not the type of high-value immigration which the likes of the US and UK can attract. It's 90% cheap labor in the form of Indonesians and Vietnamese earning a pittance and sending most of it home. And even they are certainly not welcome here by most Japanese.

It doesn't really bother me, as I am a lifelong bachelor and can take of myself. But no way in hell would I be getting married and starting a family here, let alone buying a house and putting down roots, even if I had aspirations to do so.

[–]gelatin30 0 points1 point  (0 children)

If you put down roots and start a family, your consumption patterns probably shift significantly, and generally in the direction of yen produced consumption and job security over top line income growth.

The main exceptions are the hard-to-avoid home energy costs - which I think are still relatively small for most family budgets - and the optional travel energy costs. Those travel energy costs can be a lot higher and make a difference, but see here for the recent price movement: https://www.indexmundi.com/commodities/?commodity=jet-fuel&months=60&currency=jpy

Those are down quite a bit the last year. And I don't know the supply chain details but just eyeballing jet fuel vs. current events and other oil indices (not pictured in that link) it really seems those prices are driven by specific geopolitical interruptions, not Japanese economic power or even short term central bank driven currency swings.

So sure there's some risk there, but to me looks like none other than has always been the case for a country with relatively low food and energy self sufficiency. I argue this point because you seem like a 'high value immigrant', the type to value as a neighbor or to meet at a pub, not for a GDP or tax receipt boost - so hope ya consider this if you change your mind about having kids ;_)

[–]typoerrpr 0 points1 point  (0 children)

Recently US Fed officials signalled slowing rate hikes (source below), but strangely this doesn’t seem to have impacted the exchange rate at all. On the contrary it has gotten worse. Could anyone shed some light?

https://www.cnbc.com/2023/05/24/fed-officials-less-confident-on-the-need-for-more-rate-hikes-minutes-show.html

[–]ThomasKyoto 0 points1 point  (0 children)

In Q2 2018, tourism in total currently equates to approximately 0.8% of Japan’s gross domestic product (GDP), although the broader impact is estimated to equal about 2.2% of GDP.

[–]RotaryRevolution 0 points1 point  (0 children)

Don't care, it will settle when it settles. Japan is not going down anytime soon.

[–]Herrowgayboi関東・東京都 0 points1 point  (0 children)

Not surprised a foreigner posted this.

  1. Japan doesn't rely on tourism AT ALL. Tourism only makes up a very negligible amount.
  2. Japan is a mass exporter. Their GDP is heavily dependent on their exports. Think about it... Cars, gaming consoles, etc..
  3. Reliance on US Currency. With what's going on in the white house, it has definitely has put strain on the JP economy.

IMO Japan will stay relatively stable as it feels like it's currently in maintenance mode and until they are willing to heavily innovate again.

[–]Populism-destroys 0 points1 point  (0 children)

Hopefully the BoJ sends the yen to 200 to the dollar or lower. It's good for exports, and good for Japan, after all!

[–]Ariscia関東・東京都 0 points1 point  (0 children)

Any idea

Maybe it'll hit 200 and we'll become a very cheap country.

[–]FunGhoul2 0 points1 point  (2 children)

I hope it goes to 200......and the "Rude" tourists never return

[–]tokyohoon関東・東京都 🏍 0 points1 point  (1 child)

Wrong direction - if it dropped to 80 we'd see a lot less tourists since their money wouldn't go as far.

[–]FunGhoul2 0 points1 point  (0 children)

I agree with that assesment but for me, I'm getting dollars every month and at 200 "I" could travel more :)

[–]hambugbento -3 points-2 points  (1 child)

It doesn't matter unless you're sending dollars home to pay your student loan.

[–]highgo1 10 points11 points  (0 children)

No it does. Weaker yen means more expensive imports. Which means more inflation.