Is Now the Time to Buy Yen?... Yen Deposits Surge Amid 'Weak Yen' and 800-Won Exchange Rate

Yen Deposits Increase by 919.6 Billion Won in a Month
Sharp Rise in Yen Purchases and Transaction Volume
Exchange Rate Volatility Driven by Japanese Authorities' Intervention

The weak yen phenomenon has led the KRW/JPY exchange rate to remain in the 800-won range per 100 yen, fueling a surge in efforts to purchase Japanese yen. This trend is driven by expectations that the value of the yen may rise in the future.

According to the financial sector on August 10, as of August 6, deposits in Japanese yen at the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached a total of 1,176,413,920,000 yen. Yen deposits grew from 1,051,813,800,000 yen at the end of June to 1,154,661,330,000 yen at the end of last month, an increase of approximately 102.9 billion yen over one month. Based on the KRW/JPY rate, this is equivalent to an increase of about 919.6 billion won in just a month. Foreign currency deposits are one of the products that customers join in hopes of profiting from exchange gains rather than higher interest rates. If you exchange your Korean won into foreign currency and deposit it, you can earn a profit from currency fluctuations if the exchange rate rises when you withdraw.

The amount of yen purchased with Korean won and the number of transactions have also surged. The amount of yen sold by banks to customers jumped from a cumulative total of 22,182,050,000 yen at the end of June to 36,389,710,000 yen at the end of last month. This means customers bought about 127.2 billion won more worth of yen within a month. The number of transactions also increased from 179,744 to 307,986 during the same period. As of August 6, the amount of yen purchased by customers so far this month stands at 3,610,610,000 yen through 41,076 transactions.

This trend is seen as resulting from the KRW/JPY exchange rate dropping below 900 won per 100 yen. On June 5, the reference exchange rate was 973.14 won per 100 yen, hovering between 940 and 950 won throughout June. It then fell to 893.54 won on July 24, remaining in the 800-won range through the end of July. On July 30, it dropped to as low as 876 won during intraday trading. Since the beginning of this month, the KRW/JPY exchange rate has not exceeded 910 won per 100 yen and re-entered the 800-won range from the 6th onward. As of 10:07 a.m. on this day, it recorded 895.21 won.

An official from a leading commercial bank stated, "Generally, when the KRW/JPY exchange rate falls below 900 won per 100 yen, there is a stronger tendency for people to want to purchase yen with Korean won." The official added, "However, it is impossible to predict exchange rates with certainty, so it is important to continue monitoring the market and respond accordingly."

The main factor driving changes in the KRW/JPY exchange rate is intervention by Japanese foreign exchange authorities. With the yen weakening, the Japanese government and the Bank of Japan (BOJ) launched large-scale interventions in the currency market, buying yen and selling dollars. This was followed by coordinated intervention by US and Japanese authorities, aiming to bolster the yen—with the US purchasing yen and selling euros. It was the first time in about 30 years that the two countries together intervened in the foreign exchange market.

Experts have varying views on the matter. Cha Younghoo, Researcher at Eugene Investment & Securities, explained, "Despite the special case of US cooperation, unless there is concrete funding for tax cuts, further fiscal reform by the government, additional rate hikes by the BOJ, or a rate-cutting event by the Federal Reserve, the effects of these interventions will be difficult to sustain over the long term."

Kim Hojung, Researcher at Yuanta Securities, analyzed, "Based on ex-post predictions, the median year-end KRW/JPY exchange rate is expected to reach 913 won per 100 yen, exceeding the current 895 won. Even on a path where the BOJ does not hike rates this year, it is forecast to climb to 917 won. Thus, for the KRW/JPY exchange rate, the issue is not the direction of change but the speed of the increase."

This content was produced with the assistance of AI translation services.