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The Korea Times

An increasing number of South Koreans are purchasing Japanese currency and travelling to Japan as the yen depreciates to the lowest level in eight years.
The exchange rate is falling closer to 900 won ($0.71) per 100 yen, having dropped to 904 won per 100 yen on Tuesday, which is the lowest level seen since June 2015.
Market observers are surprised at such a steep descent, considering the exchange rate was at the 1,000 won level in April. They cautiously predict that the rate may drop below 900 won soon.
The main causes behind the weakened yen are the divergent monetary policies of Japan and those of other major economies. Japan has maintained a monetary easing policy, while many other countries have followed the US Federal Reserve in tightening their monetary policies.
Japan is ‘rammed’ with visitors – and Chinese tourists aren’t even back yet
The relative appreciation of the won, caused by the recent influx of foreign investments into South Korea’s financial markets, also accelerated the move.
This led a growing number of South Koreans to start purchasing Japan’s currency.
As of Wednesday, the balance of yen deposits in major South Korean commercial banks stood at 808.2 billion yen, a 15.8 per cent increase compared to the end of May. Within just 10 business days, South Koreans have added 110.3 billion yen to their accounts.
Kim Ju-yeon, an office worker who bought a substantial amount of yen earlier this month, said that she saw no reason not to invest in yen.
“Purchasing yen is very attractive at this moment. The average won-yen exchange rate has been around 1,000 won per 100 yen. I expect investment return in the range of 10 per cent as soon as it returns to its normal level, and that is the lowest I expect,” Kim said.
Even though the second quarter of this year is generally considered an off-season, the number of South Koreans travelling to Japan is showing a noticeable surge. Some even say that a trip to Japan is cost-effective, even when compared to trips in Southeast Asia.


According to aviation statistics, 89,847 people used airlines connecting Incheon and Tokyo between June 1 and 10. This is a 34.6 increase compared to the first 10 days of January, which saw 66,741 passengers.
Reservation rates of low-cost carriers heading to Japan are averaging 90 per cent, prompting the aviation industry to increase the number of flights and introduce new destinations to Japan.
However, concerns are being raised that a prolonged depreciation of the yen could weaken South Korea’s export competitiveness.
Japan cuts red tape for private jets, superyachts to lure ultra-rich tourists
A weaker yen than the won makes Japanese products cheaper to buy than South Korean products in overseas markets. With many tourists choosing Japan over South Korea, the domestic service industry is likely to be negatively impacted as well.
Still, the weak yen is expected to persist for the time being. The Bank of Japan is likely to maintain a dovish policy, leading to a further depreciation of the yen. The Korean won is expected to appreciate mildly in the second half of this year, depending on the extent of an economic recovery.
This article was first published on The Korea Times


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An increasing number of South Koreans are investing in yen and making trips to the neighbouring nation that they say are cost-effective
But the trend has a downside as it could weaken Seoul’s export competitiveness


An increasing number of South Koreans are investing in yen and making trips to the neighbouring nation that they say are cost-effective.


Japan

Tourism

Asia travel

Currencies