Recently, while looking at my foreign currency deposits, I started thinking, “There is also exchange rate risk in holding only a large amount of yen.” Even just keeping yen in a regular savings account is no exception. This time, I will write about that realization and the inventory of my foreign currency deposits that triggered it.
The trigger was the LSP at JAL NEO BANK
Originally, this foreign currency deposit (US dollars) was not started as an investment. At JAL NEO BANK, the balance of foreign currency deposits also affects the conditions for earning LSP, so I started it with the purpose of holding a certain balance in foreign currency along with my yen deposits.
I wasn’t aiming for exchange gains, but while continuing to hold it, it became an opportunity to think about exchange rates themselves.
Current balance
When I checked my account, it was in this state.
Since I bought it at an average of 150.29 yen and it has now swung to a weaker yen at 157.86 yen, I have an unrealized gain.
Exchange rates alone move this much
I first purchased it about a year and a half ago, and from the average purchase rate of 150.29 yen to the current 157.86 yen, it is calculated that it has moved about 5% just by the exchange rate. I felt that it was quite a fluctuation when I put it into numbers again, considering that there was no movement in stock prices at all, and this range was produced only by fluctuations in the exchange rate.
When it comes to foreign stocks like US stocks, the price movement of the stock itself is added to the exchange rate fluctuation, so the range of up and down will be even larger. Seeing it move this much just by the exchange rate, my honest impression is that if I were to dabble in foreign stocks, I would need a little more mental preparation for the magnitude of that fluctuation.
There is also exchange rate risk in holding only yen
This is what I wanted to write about the most this time. If you just keep yen in a regular savings account, the amount itself does not change, so you hardly feel that the value is fluctuating. However, I have come to think that this is not “not fluctuating,” but rather “it is just difficult to notice the relative value fluctuation (exchange rate risk) with foreign currency because you are holding assets in only one currency, the yen.”
If the yen strengthens, you can buy overseas goods more cheaply, while the value of your yen assets when viewed in foreign currency increases. Conversely, if the yen weakens, overseas goods become more expensive, and the relative value of your yen assets decreases. I realized that even if you keep yen in a regular savings account forever, you are not escaping this influence; you just “don’t have the opportunity to be conscious of it.”
The trigger was a trivial reason called LSP, but as a result, it was an unexpected byproduct to be able to understand the feeling that “there is also exchange rate risk in being biased only toward the yen” as a real experience.
People who are suited to holding foreign currency and those who are not
Having written this far, I also think that holding foreign currency itself is not something that can be recommended to everyone. I think people who are suited for it are like this.
• People who have money that can be left for a long term, such as retirement funds for more than 10 years later
• People who have specific plans to use foreign currency in the future, such as overseas travel, study abroad, or overseas remittances
• People who want to prepare for the decline in the purchasing power of the yen (inflation)
• People who can wait without worrying about the exchange rate going up and down over a period of several years
Regarding the amount, I think it is basic to limit it to surplus funds after properly securing living defense funds (yen). I think it is a realistic way of thinking to start from about 10-20% of total assets and keep it within a range where your life will not collapse even if the yen strengthens or weakens.
As a supplement, it is said that even experts find it difficult to guess whether the yen will weaken or strengthen. I do not think it is something to predict the direction and bet heavily on, but rather something to accompany patiently after deciding on the purpose and the range of the amount.
How to perceive valuation gains and losses
When there is an unrealized gain like this time, it is easy to have a feeling of “I made a profit,” but this is just a valuation gain or loss (unrealized gain), and it is only confirmed when sold. Since exchange rates move daily, it can be positive or negative depending on the timing of viewing.
I perceive that the figure of +24,607 yen appearing this time is just that it happened to be a timing of a weak yen now. As long as the purpose of holding is LSP, my honest impression is that there is no need to be happy or sad about the increase or decrease of this valuation gain or loss.
My goal in my case
I personally do not intend to continue holding these foreign currency deposits for exchange gains. Since there is also a currency exchange fee, I plan to use it up on overseas travel in the end once the target points for LSP are accumulated. I think there is also an aspect that I am able to avoid being swayed by the ups and downs of the exchange rate by deciding on the goal from the beginning.
Current impressions
Unlike government bonds and gold, foreign currency deposits were an asset with a slightly unusual positioning in the series so far, not for “increasing” but for “meeting the conditions of the JAL economic zone.” However, I think it was good that I was able to gain the feeling that “there is also exchange rate risk in holding only yen” as a byproduct, regardless of the trigger.
Note that this article does not recommend holding foreign currency deposits. It is just my own experience and organization of my way of thinking. Please judge whether to start based on your own purpose and financial plan.
