The world is raising interest rates following the US… Japan maintains ‘ultra-low interest rates’
Demand among the wealthy in Hong Kong rises as Japanese real estate becomes cheaper due to yen depreciation
Popularity of ‘direct purchase in Japan’ on Korean routes… Strong ‘price merit’ despite high shipping charges and small number of companies
Japan may give up on ultra-low interest rates… Concerns about global chaos when the yen converts
The unprecedented ‘yen’ era has arrived. The picture is the Japanese yen. photo = Yonhap News
[아시아경제 김세은 인턴기자] In the era of low yen, which has arrived for the first time in 30 years, foreigners’ interest in Japan is hot for investment opportunities. The low yen refers to a situation in which the Japanese currency, the yen, is weak.
According to the South China Morning Post on the 28th, as real estate in Japan became relatively cheap due to the yen depreciation, wealthy people from Hong Kong started flocking to Tokyo to buy them.
This comes from a tour organized by a real estate agent in Hong Kong, and the cost is HK$128,000 (about 22 million won) per person based on a 6-night itinerary.
The main goal of the tour is not the tour itself, but the ‘immigration’. Imjang means to visit a real estate site. Tourists take a Bentley or helicopter ride through Tokyo’s real estate market. Experts predict that hotels that have been refurbished for the Tokyo Olympics but have become obsolete after the Olympics will be the main targets.
Hong Kong wealthy people who want to invest in real estate in Tokyo do not see Japan as simply a country with a ‘weak currency’. Instead, it sees the global recession as a place to escape. This is because Japan is not following the US-led interest rate hike trend.
Currently, Japan maintains ultra-low interest rates. On the 17th, the Bank of Japan decided to maintain the current monetary easing policy, keeping the short-term policy interest rate at -0.1% and the long-term 10-year government bond yield at zero. The reason is that if interest rates are raised under the current circumstances, interest rates on mortgages and other loans will also rise and consumption may be sluggish.
This policy of ‘maintaining ultra-low interest rates’ accelerated the yen’s depreciation. The ultra-low interest rate led to an outflow of funds in Japan. On the 29th of last month, the yen closed at 136.6 per dollar in the New York foreign exchange market. This is the lowest level in 30 years since 1998.
As the burden on Japanese consumers increased due to the acceleration of the yen, the term ‘bad yen’ arose within Japan. As of April, import prices rose 43.3% and consumer prices rose 2.1%. In the case of consumer price inflation, it is low compared to other countries, but it is a very serious level of inflation for Japan, which has not experienced any inflation for the past 30 years.
On the other hand, there are voices saying that there is no need to be afraid of the weak yen. Some experts believe that the current depreciation of the yen does not mean a real decline in the value of the Japanese currency, but simply a result of the ‘interest rate difference with the US’.
The depreciation of the yen also had an impact in Korea. Domestic ‘direct buyers’ turned their eyes to the Japanese market, which was relatively unpopular.
According to Korean standards, the won/yen fiscal exchange rate was around 1,000 won per 100 yen at the end of March, but has now dropped to 950 won. On the other hand, the won/dollar exchange rate is 1298.00 won (based on Hana Bank at 2 pm on the 3rd), which has been on an upward trend since the beginning of last year.
In the past, the direct purchase market in Japan has been less active compared to other countries because the delivery agency fee is high and there are few service providers. However, as the value of the yen fell, there was a price advantage, which led to a surge in direct purchases.
On the other hand, there is also an analysis that Japan may break the trend of maintaining ‘ultra-low interest rates’.
According to the WSJ, some hedge funds speculate that if the domestic and foreign economy becomes unstable due to the continued low yen, the Bank of Japan may give up the control of the current near-zero interest rate on government bonds. If this happens, Japanese government bond yields soar and return to the yen (a strong yen), and the global market could fluctuate.
Intern reporter Kim Se-eun callmesen@asiae.co.kr
