“Forex trading”
Image extraction: DALL・E2

*This post is intended for residents of Japan.

As of June 19, 2023, USDJPY is around 142 yen, and EURJPY is around 155 yen. Considering that the euro was around 114 yen in May 2020, the yen has depreciated by more than 40 yen in about three years.
This must be a really unbearable situation for Japanese people living overseas, who often exchange yen for foreign currency, especially those living in Europe, and I am no exception.

If we look at the longer term, USDJPY was around 70 yen in 2011, and EURJPY was around 102 yen. Historically (long-term), it would be ideal to have the flexibility to exchange a substantial amount of money when it’s low.

By the way, considering the current situation of USDJPY in 2023, it seems to be heading towards a weak yen. It has been moving towards a strong yen from about 40 years ago (in 1985, $1=260 yen), and I think it can be considered to be forming a cup-shaped chart from around the bottom of the strong yen in 2011.

This is a discussion based on the premise of viewing from a technical standpoint at the yearly candlestick level (and it’s rather forced at that), and there’s no real evidence to back up the notion that it seems to be heading in that direction. Although there are countless plausible fundamental reasons, such as the declining birth rate, this is precisely why I can’t help but wonder, “Is that really the case?” It’s the nature of a trader who has been hit with the denial of their predictions hundreds of times.

Reason for Being Interested in Forex

The initial trigger for my interest in forex was the exchange of currencies while living abroad. I lived in the United States (New York) for about 8 years from 2001, and at that time, there were no banking services like WISE or Revolut, or cryptocurrencies. If you wanted to make international transfers, you only had banks (SWIFT). There was no comparison, so I couldn’t determine whether the fees were high, but I did notice that the amount of dollars I received varied considerably every time I made a transfer of the same amount.

That’s when I started thinking, “I could make a profit from this if I do it right.” I was excited about the idea of forex trading, which has a grand history dating back to the Medici family, as if I was the one who had discovered it.

Although it’s somewhat naive and ridiculous, it led to my interest in all kinds of investments, including stocks, and it seems that it has become one of my life’s works. Regardless of how embarrassing that trigger might be, it doesn’t really matter.

Recent Methods of International Money Transfers

As I mentioned a little earlier, in addition to traditional interbank SWIFT transfers, I often use WISE for international money transfers. WISE is a banking service from the UK that allows you to open an account and issue a debit card for free, and you can instantly open accounts in various currencies including yen, which is very convenient. Currency exchange between accounts is also instant. Moreover, with recent interest rate hikes for USD, EUR, GBP, etc., if you have savings in these currencies, you can earn an interest rate of 3-4%.

Revolut, which also allows you to buy cryptocurrencies and stocks (which are strengths that WISE does not), is another banking service I use in conjunction with WISE. However, the biggest advantage of WISE is probably that when you make an international money transfer from a bank in Japan, all you need to do is transfer money to your WISE account in Japan. While it is an international money transfer, what you actually do here is a domestic money transfer, which makes the process much easier than an international bank transfer. The difference is huge compared to bank transfers abroad, where registering the recipient in advance can be quite a hassle.

Disadvantages of Banks and Banking Services

A general disadvantage of banking services, including WISE, is the fees. Even for currency exchange between accounts, for example from yen to euro, a fee of about 0.6% is charged. So if you were to exchange 1 million yen, it would cost around 6,000 yen. The exchange rate is relatively fair compared to banks.

By the way, if you use a bank, SMBC Trust Bank is relatively cheap, with a fee of about 2,000 yen (in the case of a 1 million yen transfer). However, like other banks, the exchange rate is terrible. For example, in the case of USDJPY, they add about 1 yen to the actual exchange rate. So if $1 is actually 142 yen, it will cost you 143 yen to buy foreign currency at the bank. SBI seems to be about half of that, but as of June 2023, international transfers for individuals are not possible with SBI. So, the possible method is to go from SBI (for exchange) to SMBC (for international transfer).

Whether you use WISE for international transfers or the above bank method, there is just a little difference in the amount received up to about 1 million yen.
I use WISE mainly because of the simplicity of the procedure, not because of the price we receive.

Banking services → Exchange fee
Banks → Exchange rate + International transfer fee

That’s the image of what’s being taken. In my opinion, the banks are more underhanded. However, even WISE has its underhanded parts. For example, I mentioned that you can earn interest with USD or EUR accounts, but the current target range for the US policy rate, the Federal Funds Rate, is 5.00-5.25%. However, for whatever reason, the individual customer only receives about 3%, so the difference goes to WISE. …Well, this is something all banks do, so it’s probably best to view it as something to be expected in banks and banking services.

As was said in this YouTube video (by the “Liberal Arts University” dean) (in Japanese), the most profitable…or rather, the way to exchange at the normal rate and receive the interest rate without any losses, is to use a foreign currency account with a leverage of 1 times at a forex company.

The first step, however, is to save a substantial amount of money that would make you worry about losses if you don’t use this method.