Introduction
There is a common question.
“When receiving foreign currency, is it better to take it in yen or in foreign currency?”
——That question is actually starting off on the wrong foot.
Before thinking about how to receive it, you are missing something much more important.
Please tell me.
For what purpose are you investing in foreign currency?
If this is not clear, you cannot decide between yen or foreign currency.
Strong yen? Weak yen? Such things are irrelevant.
“It’s a weak yen, so foreign currency is better.”
“It looks like the yen will get stronger, so I’ll take yen.”
——I hear that often.
But this, too, is missing the point.
Let me make one thing clear.
As long as you live in Japan, the strongest currency for you is the “yen.”
(Assuming the Bank of Japan functions properly and you live in Japan.)
Why?
If you live in Japan, you pay for rent, food, and taxes all in “yen.”
Even if you receive it in foreign currency, if you use it in Japan, you will eventually convert it to yen.
At that time, it will increase or decrease due to exchange rates.
In other words, for someone living in Japan, holding foreign currency without a purpose is simply bearing exchange rate risk.
Without a purpose, your investment will waver.
This is the most important point.
If the “purpose” of foreign currency-denominated investment is not clear, your investment style will be shaky.
The yen weakens → You regret, “I should have held foreign currency”
The yen strengthens → You panic and switch back, “It should be yen after all”
↓
You keep chasing exchange rates
＝ Investment meant to eliminate financial anxiety is
turning into investment that “increases” financial anxiety
This is putting the cart before the horse.
You started investing for peace of mind, but now you are swayed by exchange rates every day, and your anxiety is increasing.
Is your base of life in Japan? Or overseas?
So, for whom does foreign currency denomination make sense?
It is simple.
People who have plans to use that foreign currency are the ones.
Your base of life is overseas → Holding that country’s currency in foreign currency denomination = makes sense
You want to emigrate overseas in the future → Holding the currency of your destination = makes sense
Your child will study abroad → Preparing in that country’s currency = makes sense
In other words, foreign currency denomination only becomes effective when you have plans to “actually use money in that currency.”
Even if you do it, “match the currency”
And one more thing that is often overlooked.
If you are going to do foreign currency denomination, match the currency to the country you want to go to.
You want to live in America, but you hold euro-denominated assets
You want to go to Europe, but you hold dollar-denominated assets
↓
You don’t know what you are doing
＝ The country where you will use it and the currency you hold are mismatched
Do not lump everything together as “foreign currency.”
Is it dollars or euros?
Where and for what you will use it determines the currency you should hold.
Conclusion
Will you receive it in yen? Or foreign currency?
Before that question, what you should think about is——why you are holding foreign currency.
If you live in Japan, the strongest currency is the yen.
If you are going to use it in Japan, receiving it in yen is the most reliable.
There is no reason to go out of your way to take on exchange rate risk.
Foreign currency denomination is only effective for “people who have plans to actually use that currency.”
It only makes sense when there is a clear purpose, such as living overseas, planning to emigrate, or studying abroad.
And if you do it, match the currency to the country you want to go to.
Yen or foreign currency?
That is not something to worry about.
Once your goal is decided, it is automatically determined.
Where will you use that money—in which country, and in what currency?
This article is intended to provide information based on personal views and does not recommend or discourage investment in specific stocks or financial products (including insurance).
Please make investment and insurance decisions at your own discretion and responsibility.
Thank you for reading until the end🙏
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