Exchange rate of the Japanese Yen, and our experiences as an exporter
In March 2022, the Yen weakened significantly against almost all major currencies. The depreciation must have initially been sparked by the war in Ukraine, but the speed of development can only be explained by the widening gap in monetary policy between the US and Japan. A month passed, on 28 April, the exchange rate has reached the key level of 130 yen against USD; the Yen was in its weakest level in 20 years. The exchange rate against USD, HKD and CNY on that day were like this.
28 April 2022
1 USD = 130.8765 / 100 JPY = 0.7641 USD
1 HKD = 16.6791 / 100 JPY = 5.9955 HKD
1 CNY = 19.6506 / 100 JPY = 5.0889 CNY
Back in March, I remember that the local media focused both on the sharp rise in commodity prices caused by the geopolitical crisis and the Bank of Japan’s monetary policy to explain the depreciation. However, towards the end of April, the news articles mainly talked about the monetary policy and the government’s reactions. There is now widely shared consensus that the problem does come from Tokyo. The Bank of Japan is not expected to revise its current monetary easing policy until April 2023, the end of the term for Governor Kuroda, and most of the analysts expect that Japanese currency will be depreciated further.
The Yen's recent depreciation has been widely described by the local media with the term ‘bad Yen depreciation’. The argument is that the weak Yen brings more negative impacts on the Japanese economy than positive. Japan presented a record current account deficit in January 2022 due to soaring commodity prices. If this trend continues, it is said that, as a resource-importing country, the trade deficit will remain for some time. Similarly, we have seen a lot of talk about the term ‘cheaper Japan’. This is, for the locals, clearly a negative expression.
A falling yen makes a cheaper Japan.
Japan has come out from the last Covid restriction in March and since then there have not been really worrying signs of surging infection. The theme of inflation has become another staple of the local news in this situation. Japan has lived through 30-year’s non-inflation. It may be enough amount of time to lose collective memory of inflation. Comparing with other countries, the severity of price hike remains to be mild. Yet being exposed to this sort of news every day, the local population seems to develop a sentiment that ‘something bad is happening’.
In 2015, Japanese fruits export boomed due to the weak Yen.
We exported Japanese agricultural products, especially fruit, to Hong Kong and China between 2015 and 2019. The fruits were mainly apples, strawberries, peaches and grapes. Apples were sent by sea container, while strawberries, peaches and grapes by air. Having such experiences, seeing the current Yen depreciation in 2022, I have been personally more impressed by the shift in exchange rate between JPY and HKD/CNY rather than JPY and USD.
We exported Japanese agricultural products to Hong Kong and China between 2015 and 2019.
These were the exchange rates five years ago, in 2017. We considered the Yen was cheap enough and it was good for export. Exporters in Japan and importers in Hong Kong and China were all happy. I might have been staggered if I knew the rates in five years’ time back then.
28 April 2017
1 USD = 111.5406 / 100 JPY = 0.8965 USD
1 HKD = 14.3395 / 100 JPY = 6.9737 HKD
1 CNY = 16.1802 / 100 JPY = 6.1804 CNY
28 April 2022
1 USD = 130.8765 / 100 JPY = 0.7641 USD
1 HKD = 16.6791 / 100 JPY = 5.9955 HKD
1 CNY = 19.6506 / 100 JPY = 5.0889 CNY
The recent depreciation anyway reminds me how the export of Japanese agriculture products took off around 2015.
Japanese agricultural exports came into the spotlight when the second Abe administration, which began at the end of December 2012, convinced the Bank of Japan to adopt a policy for weakening the Yen. Fruit importers in Asian countries had always been interested in Japanese fruits. The quality of Japanese fruit was known to be excellent. However, due to cost issues, it was considered difficult to actually import them and compete with fruit from the USA and New Zealand on the wholesale market.
The exchange rate at the end of April 2013, soon after the start of the Yen depreciation initiative, was as follows. The Yen was quite strong at the time. No matter how good the quality was, it was almost impossible for importers in Hong Kong and elsewhere to make a profit at this rate.
28 April 2013
1 USD = 97.9276 / 100 JPY = 1.0212 USD
1 HKD = 12.6144 / 100 JPY = 7.9274 HKD
1 CNY = 15.8848 / 100 JPY = 6.2953 CNY
However, the environment had changed completely in two years’ time from 2013. The exchange rate at the end of April 2015 was quite favourable for Japanese exporters.
28 April 2015
1 USD = 118.8397 / 100 JPY = 0.8415 USD
1 HKD = 15.3338 / 100 JPY = 6.5215 HKD
1 CNY = 19.1557 / 100 JPY = 5.2204 CNY
I believe that the depreciation of the Yen between 2013 and 2015 had a symbolic effect. Many people in Asian countries realised that Japan was not as expensive as they had believed. Before that, only a few Asian importers were willing to import primary products like fruit from Japan.
We had been consulted by a Hong Kong importer in early 2015 and dispatched the first container in May 2015. They had already imported fruits from South Korea, but they thought importing from Japan was out of consideration due to the high cost. The ongoing depreciation of the Yen since 2013 had helped to change their perception. I think this kind of thing happened in various industries. It was a tipping point for those involved in the trade to discover new situations.
The weaker yen vitalized the export of the high-quality Japanese fruits.
Yet, the favourable exchange rate was not the sole condition to sell. The business would not have gone well, if the consumers at the destination had no knowledge of Japanese fruit. The rapid increase of foreign visitors to Japan since 2013 contributed significantly, in this regard. Here, that is called the inbound tourism boom, or simply ‘inbound’.
Many visitors bought fruit in Japanese supermarkets and were so impressed by the taste, and they started to look for the same products after coming back home. It is important to note that the expansion of Japanese agricultural exports since 2015 has been supported by the actual movement of people. The increasing awareness of Asian consumers through their own experiences with Japan worked in tandem with the microeconomic environments.
During 2017-2018 the Yen was not particularly strong or weak.
The peak export volume for us was in the 2017-2018 season. At that time, in one season, we exported 80 ocean 40ft containers, mainly apples, and 250 pallets of strawberries and peaches from Osaka. At that time, one out of every eight apples sold in Hong Kong was exported by us.
The Japanese fruits we exported to Hong Kong had been sold in the local supermarket chains.
Between 2017 and 2018, we always felt that the exchange rate was moving on the borderline between a weak and a strong Yen. The psychological borderline at that time was 1 HKD = 14 JPY (100 JPY = 7.14 HKD). If the Yen was higher than this (i.e. moving into the 1 HKD = 13 JPY level), importers in Hong Kong would say, ‘the Yen is a bit high these days, and the wholesale will be slow’.
Taking for actual examples, the ExRate on 28-April-2017 was fine for us, but that of 28-April-2018 would have caused slower sales in the wholesale market.
28 April 2017
1 USD = 111.5406 / 100 JPY = 0.8965 USD
1 HKD = 14.3395 / 100 JPY = 6.9737 HKD
1 CNY = 16.1802 / 100 JPY = 6.1804 CNY
28 April 2018
1 USD = 109.0393 / 100 JPY = 0.9171 USD
1 HKD = 13.8933 / 100 JPY = 7.1977 HKD
1 CNY = 17.2191 / 100 JPY = 5.8075 CNY
For those who lived through these years, today’s exchange rate (as of the end of April 2022) seems to be too attractive to overseas buyers. I guess many people in Asian countries are considering how to ‘Buy Japan (again)’, when the most difficult part of the Covid pandemic is over. In fact, we have already been approached by people who want to buy real estate in Japan. We still find it difficult to tell when the foreign tourists will come back en masse, and I would not encourage you to take immediate action especially if you want to look at the short-term ROI. Yet I cannot deny that Japanese properties look much cheaper than those in 2017 or 2018.