S.Koreans continue buying spree of sliding Japanese yen

The plunging Japanese currency has stepped up South Koreans’ bargain-hunting, posting record highs in the balance of the yen-denominated deposits for two straight months. Analysts forecast the Korean investor appetite for the yen will wane, however, as the yen is likely to rebound later this year.

The balance of yen-denominated deposits at Korea’s top five retail banks – Shinhan, Kookmin, KEB Hana, Woori and NongHyup – reached 1.36 trillion yen ($9.4 billion) in July, the second-largest of this year following 1.44 trillion yen in June. The monthly balance has rapidly increased since March as the Japanese currency has weakened against the won.

The yen hit 9.15 to the won earlier on Aug. 10, compared with 9.72 on Jan. 2. The Japanese currency to the Korean won hit 8.97 on June 19 and July 5, falling below 9 for the first time in eight years.

The yen has become one of the most sought-after currencies among Koreans due to Japan’s ultra-easy monetary policy aimed at economic growth. Japan has kept its negative interest rate policy even though other central banks sharply raised their base rates.

Experts say the yen will become stronger later this year as the Bank of Japan has made moves toward raising its base rate. The central bank said on July 28 it will offer to buy 10-year government bonds at 1.0% in fixed-rate operations, instead of the previous 0.5%.

“Market interests are rising, making it difficult for Japan’s central bank to maintain its ultra-easy policy as in the past,” said Seoul-based Daishin Securities Co. analyst Lee Da-eun. “It is unlikely that the yen will hit its weakest-ever level against the won again in the near term,” she added.

Write to So-Hyun Lee at y2eonlee@hankyung.com


Jihyun Kim edited this article.