The depreciation of the yen hit a 34-year low, will you go to Japan to buy and buy?

Half two finances

2024-05-01 17:14Published on the official account of the Economic News Center of Beijing Youth Daily, Beijing

The stumbling yen has recently hit another all-time low. On April 29, the yen depreciated against the U.S. dollar to 160 yen per dollar, the lowest in 34 years since April 1990. The exchange rate of the renminbi against the yen has also risen from about 20 at the beginning of the year to about 21.8, and the yen has depreciated by 9% against the renminbi this year. In particular, since mid-March, the yen has been depreciating at an accelerated pace. However, the depreciation of the yen means that international tourists can spend more in Japan with the same amount of local currency. A reporter from Beijing Youth Daily learned that more and more Chinese tourists have recently traveled to Japan, and many luxury stores in Japan have lined up in front of them.

The same brand-name bag is several thousand cheaper than in China

There is a long queue in front of a Japanese luxury store

"The yen has plummeted, and I'm going to Japan to get wool. Yang Juan (pseudonym), who loves to buy brand bags, has booked a plane ticket and a hotel to prepare for a direct flight to Japan on May 4. In fact, during the Spring Festival this year, Yang Juan has asked a friend to buy a LV bag in Japan, spending nearly 12,000 yuan, which is more than 1,800 yuan cheaper than in China. But recently, the yen has plummeted, and Yang Juan found that this bag is now less than 11,000 yuan in Japan, which is about 1,000 yuan cheaper than when she bought it. "If I buy more things this time, I will definitely earn back the money for flights and hotels. Yang Juan is optimistic about a LV bag, and now the price in Japan is equivalent to less than 17,000 yuan, which is nearly 6,000 yuan cheaper than in China, which is equivalent to a seven-three discount, and there are some styles of bags with a greater price difference.

It is understood that many luxury stores in Ginza, Japan have recently been full of Chinese tourists like Yang Juan who love luxury goods or purchasing agents. Some netizens shared on social platforms, "Tokyo Ginza is full of Chinese tourists, especially at the LV gate, any bag is thousands cheaper than in China, and the purchasing agent is making a lot of money." ”

However, the yen exchange rate has fluctuated greatly recently, and there may be large changes in a short period of time. "This time, I really saw the terrible exchange rate difference. "Xiaoyu from Zhejiang went shopping in Osaka, Japan with friends a few days ago, and the two bought the same brand-name bag at Takashimaya Department Store, which was only 2 hours away, and the price was nearly 600 yuan. Xiaoyu bought it first, swiped 20,138.91 yuan, and the exchange rate at that time was 1 yen = 0.046704 yuan; two hours later, when Xiaoyu's friend bought it, the exchange rate was even lower, becoming 1 yen = 0.045346 yuan, and the amount of the card was 19,550.32 yuan.

Tourists from other countries are also flocking to the city due to the depreciation of the yen. According to the latest data from the Japan Tourism Agency, foreign tourists spent 1.75 trillion yen in Japan from January to March 2024, an increase of 73.3% from the same period last year and a record high. Among them, the per capita tourism expenditure increased by 41.6% from the same period in 2019 to 208,700 yen.

According to the Japan Association of Department Stores, the total sales of department stores nationwide reached 510.9 billion yen in March this year, growing for 25 consecutive months. Among them, duty-free sales for inbound tourists increased by 2.5 times to 49.5 billion yen, the highest value since the survey began in October 2014, and a record for the third consecutive month. Sales of duty-free goods in 2023 will be 348.4 billion yen, about three times that of the previous year and the highest since 2015, when full-year data are available. Among them, luxury goods such as LV have become a favorite for international tourists.

Some people have hoarded yen in advance and have suffered blood losses recently

It is not only the choppers who want to "pick" the yen "wool", but also investors who want to make a difference in foreign exchange. However, due to the recent decline of the yen, some people who want to buy the bottom have copied halfway up the mountain and lost a lot.

"When it was 5.0 (100 yen = 5 yuan), I hoarded 3 million yen, and today I lost 12,000 yuan. "Mr. Ma has been paying attention to the yen exchange rate, and in December last year, there was a wave of depreciation of the renminbi against the yen, and he felt that the yen would continue to rise, so he stocked up on goods, and who knew that he stood on the top of the mountain. Watching the yen fall all the way this year, Mr. Ma was reluctant to stop the loss, thinking about buying in batches to spread the cost, but found that the yen continued to hit new lows, and every time he bought, he continued to lose money, and he didn't know where the bottom was.

At the beginning of this year, Mr. Liu bet that the yen would skyrocket after the interest rate hike and bought 5 million yen to hoard. As the exchange rate fell all the way, he went all the way to the bottom, "4.84 and 4.74 bought 1 million yen each, and now I don't dare to buy it." ”

The depreciation of the yen has led to increased imported inflationary pressures

It is understood that the depreciation of the yen has enhanced the competitiveness of Japan's export industry, but Japan's raw materials, energy and food are heavily dependent on imports, and the depreciation of the yen has also led to further increased imported inflationary pressure.

For example, the continued decline in the yen's exchange rate has made export-oriented companies like Toyota a lot of money. Let's say a Toyota car sells for $30,000 in the United States. In 2019, the average annual exchange rate of the yen against the U.S. dollar was 109 yen, and Toyota earned 3.27 million yen for selling a car. After the exchange rate falls to 131 yen in 2022, Toyota will receive 3.93 million yen for the same car, and it will increase to 4.38 million yen in 2024. The same car will receive 660,000 yen more in 2022 than in 2019 and 1.11 million yen more in 2024 than in 2019.

However, for importers, the depreciation of the yen means that the price of imported goods has risen, which has dealt a huge blow to small and medium-sized enterprises, and has also significantly increased the cost of living for the Japanese people through price transmission. Mr. Peng, who lives in Japan, said that when he used to buy a whole Chinese cabbage for only 7 or 8 yuan, the price has increased recently, and he can only buy 1/4 of it. The chicken he often buys at the supermarket has risen to more than 600 yen for a box more than a year ago.

For some domestic Japanese consumers who are planning to go abroad, the depreciation of the yen has greatly increased the cost of their trip. In order to save money, some Japanese tourists are reportedly choosing more cost-effective ways to travel and stay, such as choosing relatively cheap connecting flights, replacing hotels with homestays, and cooking their own food.

Will the yen continue to fall?

Many industry insiders believe that the Bank of Japan's tolerance is an important reason for the recent sharp fall in the yen. The Japanese government has repeatedly expressed concern about the continued depreciation of the yen, which will continue to import inflation into Japan and worsen its terms of trade (making exports cheaper but imports more expensive), but the BOJ lacks a strong willingness to intervene.

Last week, Bank of Japan Governor Kazuo Ueda reiterated at a press conference that the core inflation trend is the most important thing, and when the yen's impact on core inflation becomes impossible to ignore, a weak yen may become a problem for monetary policy, a statement that also caused the yen bears to fight back.

Looking ahead, market participants generally believe that the yen is unlikely to reverse its depreciation in the near term.

The macro research team of Zheshang Securities pointed out that the recent weakening of the yen is due to the resonance of internal and external drivers. First, since March, U.S. inflation has continued to exceed expectations, the Fed's interest rate cut expectations have retreated significantly, and the U.S. dollar index has performed strongly, bringing depreciation pressure to the yen. Second, Japan's own economy and inflation performance have weakened (especially domestic demand), and the Bank of Japan's stance is relatively dovish. Looking ahead, the yen exchange rate may continue to weaken from a fundamental perspective, and even if the Bank of Japan intervenes, it can only stop falling, and the reversal of the trend will require both the external environment and Japan's own fundamentals to improve.

The team expects that the USD/JPY exchange rate may continue to fluctuate at a low level around 150 in the second quarter, and may gradually rebound in the second half of the year. The exchange rate of the renminbi against the yen may remain in the current range of 4.5-4.8 in the second quarter, and the short-term weakening of the yen may increase the deficit in trade in services such as tourism, but the overall impact on the mainland's balance of payments is limited.

The CITIC Securities Research Report also believes that the future resistance to the appreciation of the yen is still large. On the one hand, domestic demand is expected to remain subdued until real wages rise. The Bank of Japan (BOJ) said in March that it would choose the appropriate level of policy rate based on prices and the economic outlook, so it is expected that the probability of a rapid rate hike by the BOJ is low. On the other hand, the U.S. economy is still resilient, U.S. inflation stickiness still exists, and the Fed's interest rate cut this year is expected to be only 75bps in an optimistic scenario, and there is a possibility that the timing of interest rate cuts will be moved back. The large gap between the interest rate differentials between Japan and the US and the growth momentum of the two countries is likely to persist for a longer period of time, which may continue to limit the strength of the yen.

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Text/Beijing Youth Daily reporter Cheng Jie

Editor/Fan Hongwei

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