Japanese Rush to Dollars Amid Weak Yen... Largest Increase in Foreign Currency Deposits in 28 Years

Due to expectations that the prolonged weakness of the yen will continue, Japanese individuals and corporations are rapidly increasing their holdings of foreign currency assets, such as US dollars. The growth in foreign currency deposits in Japan reached its highest level in 28 years.

On the 29th of last month, an employee is holding up a Japanese yen banknote at the Hana Bank Counterfeit Response Center in Jung-gu, Seoul. Photo by Yonhap News Agency

According to the Nikkei newspaper on August 21, data compiled by the Bank of Japan shows that in the second quarter of this year (April to June), the balance of foreign currency deposits at banks in Japan reached 26.1 trillion yen (approximately 22.78 trillion KRW), marking an 18% increase compared to the same period last year.

The amount of this increase was 3.9772 trillion yen (about 3.47 trillion KRW), making it the largest since the full liberalization of foreign currency deposits in 1998. The Nikkei reported that, aside from the effect of the yen-equivalent value of foreign currency deposits increasing due to the weaker yen and stronger dollar, the actual deposit balances also grew significantly.

In particular, the increase in foreign currency deposits held by individuals was noteworthy. The balance of foreign currency deposits owned by individuals stood at 6.7 trillion yen (around 5.8 trillion KRW), up 8% compared to the same period last year.

Traditionally, Japanese individual investors have tended to purchase foreign currencies, which have become relatively cheaper, during periods when the yen strengthens. However, recently, even amid a historic weak-yen environment, there has been a shift toward moving assets into foreign currencies such as the US dollar in anticipation of further declines in the value of the yen.

Investments in overseas securities have also increased. As of the end of March, Japanese households held 46.4618 trillion yen worth of overseas securities such as stocks, representing a 23% increase from a year earlier.

Corporations are also expanding their foreign currency holdings. In the second quarter of this year, the balance of foreign currency deposits held by companies reached about 19.3 trillion yen (approximately 16.8 trillion KRW), a 22% increase compared to the same period last year.

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