Sharp rebound to the 157 yen per dollar range. 3 numbers to check before selling foreign currency assets because you are ‘afraid of intervention’

“If another currency intervention happens, both my US stocks and US bonds will decrease in yen terms. Should I sell now?”

For those holding foreign currency assets, a 1 to 2 yen move in the yen in a single day is not just news; it is an event where their own balance changes. However, trying to guess the intervention and selling everything, or ignoring it and doing nothing, are both extremes. What you should do today is not predict the market. It is to check three things: your foreign currency ratio, when you will use the money, and how much yen appreciation you can withstand.

What happened

On September 25, the yen rebounded from over 159 to the 157 range against the dollar. According to reports, Finance Minister Satsuki Katayama explained that US President Trump expressed concern about the weak yen during the Japan-US summit, reaffirming the stance behind the joint intervention in July. The yen rose about 0.8% from the previous day at one point. On the other hand, the trend toward a weaker yen remained on a weekly basis.

What is important here is not to read it as “intervention will definitely happen.” Authorities’ statements check speculative yen selling, but they do not promise the date or level of implementation. Expectations for additional interest rate hikes remain in the US, and the Bank of Japan is also carefully indicating its path after rate hikes. Because Japan-US interest rate differentials, crude oil prices, investor risk appetite, and authorities’ statements all move simultaneously, exchange rates cannot be explained by a single reason.

Why it matters to your money

The yen-denominated value of dollar-denominated assets is determined by the multiplication of the asset’s own price movement and the exchange rate. Even if US stocks do not move, if the rate goes from 159 yen to 157 yen per dollar, the yen-denominated value of dollar assets decreases by about 1.3%. For an equivalent of 1 million yen, that is about 13,000 yen. Conversely, if stock prices rise by 2%, it may absorb the headwind of the exchange rate and result in a gain in yen terms.

For example, suppose you have 10,000 dollars. At 159 yen, it is 1.59 million yen; at 157 yen, it is 1.57 million yen. The difference is 20,000 yen. If the yen appreciates to 150 yen, it becomes 1.5 million yen, and the difference from the 159 yen point becomes 90,000 yen. Looking only at the numbers is scary, but the actions that should be taken by someone who will not use this 10,000 dollars for over 10 years and holds it as a global stock accumulation, and someone who will use it for study abroad next spring, are completely opposite.

The true nature of exchange rate risk is not “the yen appreciating.” It is “running out of the necessary currency at the necessary time.” If you plan to use dollars in the future, dollar assets actually serve the role of matching currencies. If you are going to use the money for a home purchase in Japan, the closer you keep it in dollars until the last minute, the more your life plans will be swayed by exchange rates.

Number 1 | What is your foreign currency ratio?

First, convert the total of your foreign currency assets into yen and divide it by your total financial assets. Include not only US stocks but also the overseas portion of global stock funds, US bonds, foreign currency deposits, and foreign currency MMFs. For investment trusts where the exact currency breakdown is unknown, it is sufficient to estimate them as “overseas assets” for now.

As an example, if you have 3 million yen in savings, 1 million yen in domestic stocks, 3 million yen in global stocks, and 1 million yen in US bonds, your overseas assets are roughly 4 million yen, which is 50% of your 8 million yen in financial assets. It is dangerous for this person to look only at the “1 million yen in US bonds” and think their foreign currency exposure is low. This is because there is also sensitivity to foreign currency within the funds.

There is no one-size-fits-all correct answer for the foreign currency ratio. However, if you are so anxious that a 5-yen appreciation makes you unable to sleep, your current ratio may exceed your psychological tolerance. Even when lowering the ratio, you can use gradual adjustments, such as shifting future accumulation destinations to yen assets or returning only bonds that have reached maturity to yen, rather than selling everything.

Number 2 | When and how much yen will you use?

Next, write down the amount you plan to use in yen within the next 3 years. This includes home down payments, cars, education expenses, and living expenses when changing jobs. Separate this amount from your market outlook. If you hold funds needed within 3 years in foreign currency, you will be forced to sell during a yen appreciation phase.

If someone who will use 2 million yen in yen next year keeps most of their 3 million yen in financial assets in US stocks, it is an act of taking exchange rate risk with spending money rather than long-term investment. On the other hand, if you have sufficient emergency funds and are accumulating for retirement 10 or more years away, there is little rationality in changing your plan based solely on short-term yen appreciation.

It becomes easier to avoid confusion if you divide your time horizon into three: “within 1 year,” “1 to 5 years,” and “10 years or more.” Consider yen deposits for within 1 year, yen assets with suppressed principal fluctuation for 1 to 5 years, and diversified growth assets for 10 years or more. With this order, you won’t have to move all your assets every time there is news of intervention.

Number 3 | What is your tolerance for yen appreciation?

Finally, calculate your yen-denominated value by setting three exchange rate scenarios. Assuming the current value is 157 yen, create a table showing how much your foreign currency assets will be worth at 150 yen and 140 yen. For 10,000 dollars, it would be 1.57 million yen, 1.5 million yen, and 1.4 million yen. The differences are 70,000 yen and 170,000 yen compared to the current value. There is also a possibility that stock price declines could overlap with this.

If someone holding 1 million yen worth of US stocks experiences a 20% drop in stock prices and a 10% appreciation of the yen simultaneously, the value doesn’t just drop by a simple sum, but by multiplication, resulting in a decrease of about 28% to approximately 720,000 yen. Can you continue your investment plan even after seeing this 280,000 yen loss? If you cannot, it may not be that the product is bad, but that your allocation is too large.

The important thing is not to tell yourself that you can endure it, but to reduce the amount you cannot endure in advance. Household security is built not on predictive power, but on a scale where your life will not be ruined even if you fail.

Three things you must not do when intervention is reported

First, do not sell everything based solely on news headlines. Even if there is intervention, the exchange rate will move again based on US-Japan interest rates and economic conditions. If you sell all at once, you often end up left behind in cash without having decided on conditions for repurchasing.

Second, do not consider unrealized gains as ‘confirmed yen.’ Even if your assets have increased in dollar terms, the exchange rate will continue to fluctuate until the moment you use them in yen. The yen-converted display on apps is convenient, but it is not a guarantee of the amount you will receive in the future.

Third, do not bet only on the yen in anticipation of intervention. The authorities’ goal is not to guarantee a specific level, but to curb excessive volatility. If you create your own line saying ‘intervention will definitely happen at 160 yen,’ you will not be able to manage losses when the rate moves outside that line.

So, how should those who sell and those who hold be divided?

Those who are likely to prioritize selling or reducing their holdings are people who plan to use the money in yen within three years, those who have converted their emergency funds into foreign currency, those whose household plans would collapse with a 10% appreciation of the yen, or those who do not know their foreign currency ratio. The priority is to convert the necessary amount back to yen, not everything.

Those who find it easier to continue holding are people who will not use the money for over 10 years, those who have secured 6 to 12 months of living expenses in yen, those whose foreign currency ratio is within their target, and those who have already simulated a simultaneous drop in stock prices and the yen exchange rate. The action of not changing your investment amount is also a sound decision if it is based on a rationale.

It is fine to postpone a decision if you are only concerned about whether or not intervention will occur and your living conditions have not changed. Creating an asset list on the weekend is more reproducible than placing orders on a day when the market is volatile.

One step you can take today

Open your brokerage and bank accounts and make a note of only these three lines.

1. Total financial assets: ___ 10,000 yen

2. Foreign currency/overseas assets: ___ 10,000 yen (ratio ___%)

3. Amount planned to be used in yen within 3 years: ___ 10,000 yen

If the third item exceeds your yen deposits, create a plan to return the shortfall to yen before worrying about market predictions. If it does not exceed them, check the yen-converted amounts at 150 yen and 140 yen to determine if they are within a range you can endure.

You don’t need to guess the intervention. If you know your foreign currency ratio and when you plan to use the money, the number of times you are swayed by the news will decrease. What you need is not an answer to ‘will the yen rise,’ but an answer to ‘can I maintain my life plan even if the yen rises?’

Thinking based on three common situations

You are investing in global stocks every month through the new NISA

If the purpose of your investment is for retirement funds 20 years from now and you have secured your emergency funds in yen, there is no high necessity to stop your investment just because of caution regarding intervention. There is also the aspect that if the yen appreciates, you can buy more overseas assets for the same amount of yen. However, since global stocks also have a high overseas ratio, do not think that ‘I have no foreign currency deposits, so my exchange rate risk is zero.’ Adjust your investment amount to one that you can continue even if the valuation drops by 20-30%.

The reason to stop a savings plan is not exchange rate forecasts, but changes in household conditions such as a shortage of emergency funds, an increase in expenses within three years, or monthly deficits. Separating market conditions from household conditions makes your judgment less likely to waver.

Planning to hold US bonds until maturity

Even if you know the maturity amount in dollars, the yen-equivalent amount is not fixed. If you plan to use it in yen after maturity, there is a method of spreading the maturity dates over multiple years rather than concentrating them on a single day. Also, you have the option of not converting the entire amount to yen at once upon maturity, but only returning the necessary amount. However, please check the exchange fees, taxes, and the mid-term sale price of the bonds.

The view that ‘because the yield is 5%, it is safe until the yen appreciates by 5%’ is also insufficient. You need to compare the one-year yield, the cumulative interest until maturity, the purchase price, exchange rate movements, and the after-tax receipt amount over the same period.

Planning to use foreign currency deposits for travel expenses

If you use dollars at your travel destination, your dollar assets serve the role of securing the target currency. Even if the yen-equivalent value drops, your plan will not be ruined as long as the required dollar amount remains the same. On the other hand, if there is a high possibility that you will cancel the trip and use the money in Japan, there is little point in accepting the valuation loss during yen appreciation. Align your asset currency once the expenditure currency is determined.

Order of selling

Even if you find that your foreign currency ratio is too high, you do not need to sell everything at once. First, return the amount needed for yen expenditures within three years, then the amount for the emergency fund shortage, and finally the amount exceeding your target ratio. In this order, you can prioritize life necessities over taxes or timing.

For products with unrealized gains, check the tax on capital gains, the timing for reusing tax-free quotas if it is a NISA account, accrued interest or sale prices for bonds, and the treatment of exchange gains for foreign currency deposits. Since tax matters vary by individual circumstances, please check the latest official information or consult an expert.

Also decide in advance where to place the yen after the sale. If you do not have a place that matches your usage timing, such as ordinary deposits, time deposits, or government bonds for individuals, you will be more likely to jump at other products in the news after selling.

Checklist for saving

• Combined foreign and overseas assets

• Subtracted yen expenditures within 3 years

• Calculated yen equivalents at 150 yen and 140 yen

• Tested simultaneous occurrence with a 20% stock market drop

• Prioritized selling from the yen funding shortage

• Confirmed taxes, fees, and maturity conditions

• Set the next inspection date for six months later

If these seven items are filled out, you won’t have to worry from scratch the next time intervention speculation arises. The goal is not to beat the news, but to create a state where you can make decisions using the same procedure even when the news changes.