There are several economic factors that affect the value of the JPY. Understand what they are and how they work to find the best exchange rate when you send money to Japan.
When you send money to Japan from Australia, locking in the best AUD/JPY exchange rate will guarantee value for money. However, to get the highest rate on offer, you will need to time your transfer when the AUD is strong in value compared to the JPY.
You will also need to compare money transfer providers to find the company that offers the best exchange rates and lowest fees, so read on to find out how to get the best deal when sending a JPY international money transfer.
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History of the JPY
The Japanese yen (JPY, ¥) is the official currency of Japan. It is the third most commonly traded currency in the world, after the US dollar (USD) and the euro (EUR). When it comes to reserve currency held by the central banks of countries around the world, the JPY is right behind the US dollar, euro and pound sterling (GBP).
The use of the Japanese yen to carry trades with the USD and Australian dollar (AUD) is quite common, mainly because of the yen’s relatively low cash rate. This is when people sell currencies from countries with low interest rates and buy currencies from countries with higher interest rates, which is also known as a “carry trade”.
Currency use in Japan dates back to the 8th century, when the use of copper and silver coins called Wado Kaichin was prevalent. These coins resembled Chinese coins and at one point, when Japan could not produce enough coins, it started importing coins from China. From the 14th to the 16th century Japan minted coins (Toraisen and Shichusen) privately to meet growing demand. It began minting silver and gold coins referred to as Koshu Kin around the 15th century, which went on to become the country’s new standard currency.
The modern-day yen came into effect in May 1871, and by December 1931 it shifted from the gold standard to the managed currency system.
JPY exchange rates
By 1932 the value of the yen fell to USD0.30, and by 1933 it dropped to USD0.20. Its value remained steady until World War II began, and by December 1941 it traded at USD0.23.
There was no true exchange rate for the yen from December 1941 to April 1949 and inflation during the war got the yen to drop to a fraction of what it was valued before the war. In April 1949, with the aim to stabilise prices in Japan, a United States plan making use of the Bretton Woods System fixed the value of the yen at one USD per 360 JPY.
There was no change in this exchange rate until 1971, at which point the US stopped following the gold standard. The JPY, by this point, had become largely undervalued. While imports began costing the Japanese too much, its exports sold for too little internationally.
After the US devalued the dollar in 1971 the Japanese government agreed to a new fixed exchange rate, which stood at 308 yen per US dollar. But supply and demand pressures in the forex markets meant that the new rates were hard to maintain, and by 1973 Japan had adopted the floating currency system.
The JPY climbed in value until the onset of the oil crises in 1973. From an average of around 271 JPY per USD in 1973, its value dropped to in between 290 and 300 JPY from 1974 to 1976. A trade surplus re-emergence got it to trade at 211 JPY per USD in 1978, but another oil shock saw the USD trade at 227 JPY by 1980.
The 1985 signing of the Plaza Accord saw the JPY reach a peak of 128 against the USD by 1988. It dropped in value slightly in 1989 and 1990, but got to a new high of 123 USD in December 1992. By April 1995, it hit a new peak of less than ¥80 per USD, at which point Japan’s economy was temporarily almost the same size as America’s.
However, the Japanese asset price bubble saw the JPY decline in value, until the global economic crisis that began in 2008 saw a reversal in the currency’s depreciation trend. The JPY then gained ground against most other major currencies, and from November 2008 to April 2013, the USD was valued at less than 100 JPY, and 1 USD traded at over 100 JPY again only in May 2013.
Elsewhere, the JPY has traditionally traded at a lower value compared to the AUD. Japan is one of Australia’s largest trading partners, and in the 10-year period from 2006 to 2016, 1 AUD traded between 56.33 and 107.36 JPY.
The table below tracks the performance of the JPY against a number of major currencies across the past decade.
|January 2006||January 2011||January 2016|
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Factors that affect the value of the JPY
There are many different issues and indicators that can have an impact on the value of one country’s currency relative to another. These include high or low interest rates, supply and demand for a currency, demand for that country’s exports, consumer sentiment and overall economic performance. Even national elections and fears of political instability can also have an effect.
Some of the factors that affect the value of the AUD/JPY exchange rate include:
This is in part due to the popularity of “carry trades”, where forex traders buy a currency with a higher interest rate and fund that purchase by selling a currency with a lower interest rate.
Australia is widely considered to be a commodity currency, with its economic performance closely tied to the value of and demand for commodities.
Imports and exports
Japan is Australia’s second largest trading partner and accounts for around 18% of Australia’s exports. Around 7% of Australia’s total imports also come from Japan.
Supply and demand
The supply and demand for the JPY and AUD on global currency markets affects their value.
Overall economic performance
A range of indicators including each country’s Gross Domestic Product (GDP) and unemployment figures will also be taken into account. Japan’s economy also depends heavily on manufacturing, so the performance of this sector is crucial to the value of the JPY.
As Japan imports most of its oil, a rise in oil prices can be bad news for the Japanese economy.
The Tankan Survey
This economic survey by the Central Bank of Japan tracks the short-term sentiments of Japanese business owners, and a positive outlook can lead to a rise in the value of the yen.
When is the best time to transfer money to Japan?
The best time to send money to Japan is when the AUD/JPY exchange rate is at its highest. In other words, when 1 AUD buys you the maximum amount of JPY.
However, due to the simple fact that there are myriad of factors that can lead an exchange rate to rise or fall, forecasting the future value of any currency relative to another is always going to be difficult.
But that doesn’t mean you can’t educate yourself on the ins and outs of the AUD/JPY exchange rate. Monitor key economic and financial developments throughout Australia and Japan, and take note of AUD/JPY exchange rate forecasts from respected economists.
Another handy resource when trying to find the best time to send AUD to JPY is to look back at the history of the AUD/JPY exchange rate. There are heaps of charts, graphs and data on currency conversion websites like xe.com and oanda.com, allowing tou to easily track the 10-year performance of the AUD/JPY rate. This can help you understand the fluctuations an exchange rate can encounter across a 10-year period, and can also increase your knowledge of the issues that affect the value of the yen.
As the chart below of the AUD/JPY exchange rate shows, the best times to transfer AUD to JPY in the year preceding 29 November 2016 were:
- In December 2015, when 1 AUD = 90.39 JPY
- In March and April 2016, when 1 AUD traded above 86 JPY
- In November 2016, when 1 AUD = 84.50 JPY
On the flipside, the worst times to send money to Japan were in June 2016, when 1 AUD = 74.91 JPY, and July, when 1 AUD = 75.32 JPY.
* Screenshot taken from xe.com on 29/11/2016
Case study: Choosing the right time to send a JPY transfer
Jarred is in a long-distance relationship with Sumiko, a girl he met when studying in Japan last year. While Sumiko stayed in Tokyo, Jarred has had to return to Australia for a year to finish his degree.
Jarred wants to send 100,000 JPY to Sumiko to help her pay off her new car, but he knows that sending the money at the wrong time could see him lose a lot of money due to a poor exchange rate. He decides to wait out 2016 to see when would be the best time to send his transfer.
Jarred initially prepares to send the transfer in early January, but is dismayed to discover that the AUD has fallen from a value of more than 90 JPY in December 2015 to 80 JPY.
If he waits until March, when 1 AUD = 86 JPY, Jarred can find much better value for money. The AUD reaches the 86 JPY mark once again in April, but if he misses this chance Jarred will have to wait until late November for the AUD to head back towards 85 JPY again.
The table below shows just how different the total cost of Jarred’s transaction will be if he chooses to send the funds at different times of the year. As you can see, simply by sending his transfer in April instead of June, Jarred can save a substantial amount of $174.98 – but still ensure that Sumiko receives 100,000 JPY.
|January 2016||April 2016||June 2016||November 2016|
|Exchange rate||1 AUD = 80.25 JPY||1 AUD = 86.21 JPY||1 AUD = 74.91 JPY||1 AUD = 84.40 JPY|
|AUD needed to transfer JPY 100,000||$1,246.11||$1,159.96||$1,334.94||$1184.83|
Why you need to choose the right money transfer provider
To find the best JPY exchange rate, not only do you need to send your transfer at the optimum time of year, but you also need to find the best money transfer provider to handle the transaction.
Comparing money transfer providers allows you to find the transfer company with the best exchange rates, lowest fees and other flexible features that can help you save time and money.
It’s important to remember that the additional costs associated with each transaction will never be the same between different transfer providers. First, transfer providers will add a margin to the foreign exchange they sell you, so the size of their margin directly affects the exchange rate you will receive.
Second, you will usually need to pay a fee for each transaction. This could be a flat fee across the board or could be calculated as a minor percentage of your total transaction amount, so the size of your transfer could impact upon how much you pay.
That’s why it’s essential to compare money transfer providers to find the best value for money for your JPY transfer.
Case study: Yoshio compares transfer options
Yoshio is studying an engineering degree at an Australian university and he wants to send $1,000 back home to his sister in Tokyo. The transfer is a birthday present for his little sister, and Yoshio also intermittently sends money back to other family members in Japan.
He has previously sent his international money transfers from the account he holds with a major Australian bank, but Yoshio is sick of the low exchange rates they offer and decides to look for a better deal. He compares the cost of sending $1,000 to Japan from his bank account with the cost of sending it with a cash transfer provider and two online money transfer companies. As the table below shows, if Yoshio uses money transfer company 2 instead of his bank, he can send an extra 5,018.54 JPY and also save $15 in transfer fees.
This clearly demonstrates why it’s so important to compare your options before choosing a transfer provider.
|Bank||Cash transfer company||Money transfer company 1||Money transfer company 2|
|Exchange rate||1 AUD = 78.740157 JPY||1 AUD = 80.5504 JPY||1 AUD = 0.8250 JPY||1 AUD = 83.7587 JPY|
|Amount sent (in AUD)||$1,000||$1,000||$1,000||$1,000|
|Total cost of transfer||$1,022||$1,070||$1,005||$1,007|
|Amount received (in JPY)||78,740.16||80,550.40||82,500||83,758.70|
International money transfer options
There are four options when you want to send an AUD to JPY international money transfer:
The easiest option is to send the funds straight from your Australian bank account to a Japanese bank account. Unfortunately, banks offer quite poor exchange rates and charge high transaction fees.
Cash transfer companies like Western Union and Moneygram allow you to send cash transfers all around the world within minutes, and offer the convenience of cash pickup for your recipient. However, their transfer fees can be quite high compared to other options and you can usually find better exchange rates elsewhere.
Foreign currency specialists, such as WorldRemit and OFX, usually offer the best exchange rates and lowest transfer fees out of all the options available. Your money is sent quickly and securely online to your recipient’s bank account and you may also be able to avoid transaction fees if you transfer a large amount.
PayPal’s international money transfer service offers a quick and easy way to send money to Japan. However, due to its fee structure, it’s only really a viable option for small transfer amounts.
How to compare money transfer providers
If you want to send AUD to JPY, it’s essential that you consider a long list of factors when comparing money transfer providers:
Finding the best exchange rate is crucial if you want value for money from your international transfer. Compare AUD/JPY exchange rates across a wide range of transfer companies to see which one comes out on top, but remember that you will also need to take each provider’s fees into account.
Transfer fees can be charged as a flat amount or as a percentage of your transaction. Shop around to see which provider will offer the lowest fees for the type of transfer you want to send, and remember that some companies won’t charge any fees on larger transfers.
How to send and receive
What options are available for sending a transfer? As well as online, are there in-person or over-the-phone transfers available too? Also check whether there’s a handy smartphone app for sending transfers, and examine the ways in which your beneficiary can receive the funds.
In addition to sending one-off spot transfers, you may also be able to take advantage of flexible transfer options such as:
- Setting up a regular payment schedule for repeat payments
- Locking in an exchange rate for a future transaction with a forward contract
- Using a limit order to ensure that your transfer is sent when the exchange rate you want becomes available
If you ever experience any problems with the transfer service, will you be able to access customer support quickly and easily? Look for phone, email and live chat contact options, as well as online help sections with the answers to frequently asked questions.