With the yen’s continued weakness, more people are likely wondering how to protect and grow their assets.
One prominent option gaining attention is “foreign currency deposits.”
Financial institutions actively promote campaigns at branches and online, touting high interest rates and point rewards, which may seem appealing even to beginners.
However, avoid getting carried away by easy promises.
Let’s explore the true value hidden within foreign currency deposits and the risks that are often overlooked.
Foreign Currency Deposits: Investment Products Disguised as “Deposits”
Many people likely view foreign currency deposits as a simple service: exchanging Japanese yen for foreign currencies like US dollars or euros and depositing them in a bank.
However, in reality, they involve exchange rate risks and fees. Unlike standard yen deposits, they are closer in nature to products designed for asset management.
A major appeal, especially given the current interest rate differential between Japan and the US, is that deposits in currencies like the US dollar can offer higher interest rates than yen deposits.
Short-term promotional rates banks offer to attract new customers are often set at very high levels, creating the impression that assets can grow efficiently just by depositing money.
The Currency and Fee Barriers Behind High Interest Rates
The greatest strength of foreign currency deposits lies in their ability to serve as a form of “currency diversification,” allowing you to earn higher interest rates than in Japan while reducing the risk of having assets overly concentrated in Japanese yen. However, you should not assume that “assets will easily increase.”
First, be mindful of the exchange rate fluctuation risk that inevitably occurs when depositing and withdrawing funds.
If the yen appreciates during the investment period, not only could the interest gains be offset, but the principal converted back to yen might even fall below the original amount.
Additionally, the foreign exchange fees incurred during currency conversion represent a significant cost.
Frequent deposits and withdrawals can negate the benefits of high interest rates, effectively eroding your actual returns.
Furthermore, being excluded from Japan’s deposit insurance system (payoff) represents a fundamentally different risk compared to yen deposits.
Smart Utilization Methods and How to Choose a Financial Institution Without Failure
When utilizing foreign currency deposits, it is crucial not to be swayed by the immediate high interest rates, but rather to position them strictly as a means of long-term asset diversification.
Rather than chasing short-term gains, an approach is required where a portion of assets is held in foreign currency, based on a correct understanding of the risks and costs involved.
When actually starting, compare financial institutions comprehensively—considering not just interest rates but also exchange fee levels and app usability.
Online banks often present the most rational choice.
Particularly, banks like Sony Bank and Sumishin SBI Net Bank feature extremely low fees and offer robust, user-friendly savings functions suitable even for beginners.
Foreign currency deposits can be a powerful asset defense tool when used correctly.
Thoroughly researching fees and risks, then approaching it with a long-term perspective within manageable limits, represents a wise form of asset building suited to today’s times.
