Japanese Savers Flock to Foreign Currencies as Yen Weakness Persists

Japanese households and companies have been shifting their financial assets away from yen-denominated assets in favor of foreign currencies, driven by expectations that the yen will continue to weaken. According to data from the Bank of Japan, foreign-currency deposits held at Japanese banks surged by a record ¥4 trillion (approximately $25.1 billion) in the April-June quarter compared to the same period last year.

The average balance of these foreign-currency deposits reached approximately ¥26.1 trillion, an 18% increase from the same period a year ago. This trend is not limited to retail investors; companies are also parking their export revenues and building buffers in foreign currencies as they hedge against further yen depreciation.

Currency strategists note that the deposit flows themselves have become a factor in the foreign-exchange market, adding selling pressure on the Japanese currency when banks convert yen into dollars or euros to manage their positions. This creates a feedback loop that can amplify yen weakness during periods of heightened diversification demand.