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 phenomenon of a weak yen, with the KRW/JPY exchange rate staying in the 800 won range per 100 yen, is prompting increased activity to buy Japanese yen. This is fueled by expectations that the value of the yen may rise in the future.

According to the financial sector on August 10th, as of August 6th, the balance of yen-denominated deposits at the five major banks (KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank, and NH Nonghyup Bank) amounted to 1,176.41392 billion yen. The balance of yen deposits increased from 1,051.8138 billion yen at the end of June to 1,154.6133 billion yen at the end of last month, a rise of about 102.9 billion yen. When converted to Korean won, this means an increase of approximately 919.6 billion won over the course of one month. Foreign currency deposits are one of the products that customers sign up for in hopes of gaining foreign exchange profit rather than for interest income. By converting KRW to foreign currency and making a deposit, the depositor can realize gains if the exchange rate rises by the time of withdrawal.

The amount and number of transactions for purchases of yen with KRW also rose sharply. The amount of yen sold to customers by banks jumped from a cumulative 22.18205 billion yen at the end of June to 36.38971 billion yen at the end of last month. This means that customers additionally purchased about 127.2 billion won worth of yen within a month. During the same period, the number of transactions increased from 179,744 to 307,986. So far this month, as of August 6th, the amount of yen purchased by customers and the number of transactions stood at 3.61061 billion yen and 41,076 cases, respectively.

This trend has been analyzed as a response to the KRW/JPY exchange rate falling below 900 won per 100 yen. The KRW/JPY rate stood at 973.14 won per 100 yen based on the standard exchange rate on June 5, and moved in the range of 940-950 won for the month. It then fell to 893.54 won on July 24 and remained in the 800 won range through July 30. On July 30, it briefly dropped to 876 won during trading hours. Since the beginning of this month, the exchange rate has remained below 910 won per 100 yen and has reentered the 800 won range as of August 6. As of 10:07 a.m. on this day, it stood at 895.21 won.

An official at a commercial bank commented, "Usually, when the KRW/JPY exchange rate drops below 900 won per 100 yen, there is a stronger tendency for customers to buy yen with KRW," adding, "However, as exchange rates are inherently unpredictable, it is important to continually monitor market conditions and respond accordingly."

The main variable affecting KRW/JPY fluctuations is intervention by Japanese currency authorities. As the yen weakened, the Japanese government and the Bank of Japan (BOJ) intervened in the foreign exchange market by buying up yen on a large scale and selling U.S. dollars. The U.S. and Japanese authorities have since joined forces for coordinated intervention to support the yen, with the United States also participating by buying yen and selling euros. This marks the first time in about 30 years that the two countries have jointly intervened in the foreign exchange market.

Experts have diverse views on this situation. Cha Young-hoo, a researcher at Eugene Investment & Securities, explained, "Despite the special circumstance of U.S. cooperation, if there is no follow-through on measures such as securing specific funding sources for tax cuts, fiscal consolidation by the government, additional rate hikes by the BOJ, or rate cuts by the Federal Reserve, the effect of the intervention is unlikely to be prolonged."

Hojeong Kim, a researcher at Yuanta Securities, said, "According to the post-forecast median for the KRW/JPY exchange rate at the end of the year, it is expected to reach 913 won per 100 yen, surpassing the current 895 won. Even in the scenario where the BOJ does not raise rates this year, the rate will rise to 917 won, confirming an upward trajectory," adding, "For the KRW/JPY exchange rate, the issue is the speed of the increase, not the direction."

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