Posts Tagged ‘currency exchange’

Play money: Forgotten fate of foreign currency

Monday, June 4th, 2012

Stuff old people bring back from abroad

The magazine Travel Journal recently reported the results of a survey carried out by the Ministry of Internal Affairs among 7,829 travelers after the recent Golden Week holiday. The ministry asked people who had changed yen into foreign currencies how much of that money was left over in cash after they returned to Japan. The average amount of foreign cash remaining among those who responded was the equivalent of ¥38,871. Somehow, the ministry extrapolated this figure to reach the conclusion that, nationwide, there is about ¥1.3 trillion worth of foreign currencies sitting around in people’s dresser drawers or stuck in the back of wardrobes, which is a lot of money.

The survey also found out that the average Japanese traveler going overseas exchanges ¥71,940 on each trip, and spends about 70 percent of that money. The average amount of cash that is stolen from a Japanese robbery victim overseas is ¥65,730 per incident. In 12 percent of the cases, more than ¥100,000 in equivalent cash is stolen from Japanese victims. In 1 percent of these cases the amount is over ¥1 million.

For better or worse, Japanese tourists are famous in foreign countries for carrying a lot of cash, presumably because in Japan merchants still prefer transactions in cash and Japan is a relatively safe country for doing so. It’s one reason why Japanese tourists spend so much in airports. They feel the need to get rid of their foreign cash, even if it’s spent on things they don’t need. Japan Travel also comments that older Japanese people, who tend to travel in tour groups, rarely think about the exchange rate, and especially now with the yen so high may end up exchanging more yen than they really need.

Since this forgotten foreign currency in homes is likely worth less that it was when the exchange was originally made, people may not be so enthusiastic about trading it in for yen, at least not right away. Still, the government must surely be wondering how it can get its hands on it. Travel Journal says the Ministry of Internal Affairs is thinking of launching a “donation” campaign for the money. We can imagine the catch copy: “You can’t spend it here, so why not give it to us?”

Foreign carmakers don’t need a strong yen (but they’re happy to have it)

Tuesday, January 10th, 2012

Make mine Porsche

The European debt crisis has pushed the value of the yen up in relation to the euro in ways that are making a lot of Japanese exporters anxious. As one industrialist told NHK the other night, it isn’t the same as the yen’s rise against the dollar, a development they can counteract at least partially by increasing production in the U.S. There’s relatively little Japanese production capacity in Europe.

Tokyo Shimbun wonders why the drop in the euro hasn’t helped Japanese buyers of European cars. While some other European products have dropped in price over the last year due to the exchange rate, cars have stayed the same. The given reason is that manufacturers decide on prices only once a year, so short-term currency rate fluctuations aren’t necessarily reflected on sticker prices. However, another reason came from an anonymous industry insider who told the newspaper that makers of European automobiles “have a responsibility to maintain brand value” to customers who pay more under the assumption that when they trade in the car down the line they’ll get more money for it. Given that trade-in values of automobiles in Japan are quite low to begin with, this explanation sounds only half right.

To put things into perspective, the value of the euro against the yen has decreased 40 percent since 2007, when it was more than ¥160. During the 2011 calendar year it lost ¥8, which means a windfall of ¥370,000 to makers for a car priced at ¥5 million. And despite the ongoing recession, the number of imports sold in November was 30 percent higher than the number sold in November 2010. According to analysts interviewed by Tokyo Shimbun, Japanese car buyers preferred European cars for their “energy saving qualities and performance.” Certain models, in fact, are so popular they’re on back order. Consequently, there is absolutely no incentive to reduce prices, and Japanese customers don’t really expect it the way they expect Japanese makers to lower prices in order to be competitive.

The fact is, the high yen gets a lot of press in Japan because Japanese manufacturers count so much on overseas sales. Market share in the U.S. and other regions is extremely important. In contrast, the Japan market is a relatively small one for European carmakers. And since many of them have over the past decade bypassed local importers and set up their own dealerships, they can more or less do what they want, and that includes ignoring the social pressure of reflecting the high yen in their prices.

Yet another reason for good sales is the March disaster, which disrupted supply chains for Japanese cars. Foreign car supply was unaffected, resulting in a 7 percent increase in sales (95,452 total sold) for the first half of 2011 alone. BMW, which now sells the Mini, enjoyed an 8.7 percent increase. Interestingly enough, out of all the exporters Volkswagen sold the most and yet saw a decrease of 3.2 percent over the previous year.

Fair Trade turns from a movement into a brand

Tuesday, November 15th, 2011

Guilt-free indulgence

We stopped buying chocolate after seeing a March 2010 BBC Panorama report about child slavery on cocoa plantations in western Africa. Ghana and Cote d’Ivoire produce 60 percent of the world’s cocoa, and much of the picking is done by children who are sold to plantations by their impoverished parents or human traffickers. Some cooperatives that had been approved for Fair Trade status were later found to have used child labor and suspended from receiving the designation by the Fair Trade Foundation. That meant their cocoa could not be used in chocolate that received the Fair Trade label, which indicates that production followed certain standards and producers were being paid a “fair” price for their wares. The BBC’s point was that almost any chocolate that did not bear the Fair Trade label was likely to have been produced by slave labor.

Once or twice a year, however, we do buy Fair Trade chocolate from People Tree Japan through a local food cooperative. People Tree is a non-profit group that specializes in Fair Trade products from all over the world. According to the organization’s literature, the cocoa that goes into their chocolate bars is produced in various South American countries and Ghana, and then processed in Switzerland under the People Tree brand. Shipments of the chocolate to People Tree are not continuous. When the NPO receives a periodic shipment they announce it through their various distributors, and apparently stocks sell out rather quickly. The chocolate isn’t cheap: ¥290 for a 50-gram bar. At your local supermarket you can buy the same size chocolate bar made by Meiji, Morinaga or any other major confectionery company for as low as ¥100. Does the People Tree chocolate taste better? That’s a matter of personal preference, but chocolate is chocolate. In any case, it’s apparent that people buy it because of the Fair Trade label.

Continue reading about Fair Trade products →

Yen surge not as strange as it sounds

Tuesday, March 22nd, 2011

Last week, when all those foreigners bolted the country they got a nice little windfall from the ongoing crisis if they traded in all their hard-earned yen for whatever currency they’d need to get by back home. When markets opened after that nerve-wracking weekend the U.S. dollar, for instance, had lost up to ¥5 since the week before, from 82 to 77. A lot of people were dumbfounded, since such a reaction flies in the face of so-called textbook economics. Why would Japan’s currency get stronger as a result of such a disaster? Wouldn’t people be trying to unload their yen?

Whoops!

The easiest explanation for the surge was the idea of “repatriation.” Japanese companies with investments overseas in other currencies quickly exchanged much of their holdings into yen in order to pay for reconstruction or, in the case of insurance companies, to pay benefits to people and businesses with damage policies. However, as most Japanese economists have pointed out since then, that alone wouldn’t have explained such a pronounced increase in such a short time.

According to the Mainichi Shimbun, the Great Hanshin Earthquake of 1995 created a precedent for the yen surge. Three months after that earthquake destroyed much of Kobe, the yen was the highest against the dollar that it had ever been in history up to that point. At the time, Japan’s GDP was still the envy of the world, and investors with extra cash decided to buy yen, believing that it was sounder than a lot of other investments, especially since Kobe would require lots of money to rebuild. They were basically chasing the repatriated yen. As always, Japan’s exporters panicked. The Bank of Japan intervened to bring the yen down, but they were unsuccessful. It wasn’t until the summer, when the United States and Europe joined in the intervention, that the yen started to drop.

Continue reading about the post-quake yen. →

RSS

Recent posts