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The Dual Impact of Yen Depreciation: Foreign Investment Opportunities and Domestic Challenges


As the U.S. tightens its monetary policy, leading to a rise in long-term interest rates with the 10-year Treasury yield surpassing 4% as of October 2022, the attractiveness of holding deposits in Japanese banks—which offer negligible interest—diminishes in favor of purchasing U.S. treasuries. Despite potential risks of a yen rebound, the shift towards higher yielding investments accelerates the yen's depreciation.


This depreciation, however, unveils opportunities for foreign investors, making Japanese assets seem undervalued due to the favorable exchange rates. The decline of the Nikkei 225 in dollar terms by 28% since the start of 2022 exceeds its fall in yen terms, highlighting the increased affordability of Japanese stocks for foreign investors.


The High Cost of Taxis in Japan: A Deterrent for Tourists

A key criticism among inbound tourists, notably voiced by a Chinese influencer, is the high cost of taxi fares in Japan. A ride from Odaiba to Shinjuku costing 7,560 yen exemplifies fares that are 6 to 8 times higher than those in Beijing or Shanghai, suggesting tourists to reconsider taxi use due to potential cost shocks.


Foreign Investors Eyeing Japan’s Assets

Despite domestic concerns over taxi fares and the general cost of living, Japan’s assets are becoming increasingly attractive to foreign investors, thanks to the yen’s depreciation. Real estate, in particular, offers a lucrative avenue for investment, with Tokyo ranking third in the global city comprehensive strength index. The index highlights Tokyo's appeal based on affordability, safety, cleanliness, and quality of life, making it an attractive destination for foreign real estate investment.


Chinese Investment in Japanese Real Estate

The yen's depreciation against the Chinese yuan, which has seen the yen lose 25% of its value since May 2020, is sparking interest among Chinese investors. Not limited to consumer purchases, this interest extends to inbound investments, particularly in real estate. Platforms like 神居秒算 facilitate these investments, allowing Chinese investors to virtually explore and complete transactions online, capitalizing on Japan's digital reforms in real estate transactions.


The Transformation of Japan's Taxi Industry

The necessity for innovation in Japan’s taxi industry is underscored by the aging driver demographic and the global shift towards ride-sharing models. Initiatives like unlimited ride passes for seniors, demonstrated by USC’s experiment with Lyft, suggest a potential for ride-sharing to improve seniors' quality of life and health outcomes.


As Japan navigates these complex economic and social changes, the influx of foreign investment in real estate and the potential reform of the taxi industry represent significant shifts in the domestic market, influenced by the global economic landscape and Japan's demographic challenges.

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