Currency Limbo: How Current Exchange Rate Trends Affect American Expats in Japan
The US dollar is losing value everyday and many tourists abroad rejoice as they can travel to New York for a new low price. A weak dollar, however, is good for more than those European tourists with unstylish capri pants. US companies see a cheaper price tag for all exports, subsequently increasing manufacturing and spurring the economy. But a very dragging economy has consumers and business once again losing faith in the future of the US economy.
A weak dollar means trouble for countries who rely on US consumers to import their goods. It is said that Japanese companies such as Toyota lose millions of dollars when the exchange rate moves even as little as 4 yen per dollar. As a result, the Japanese government, which is known for it’s strict monetary policy, added a bit more yen to the economy to devalue the yen against the dollar. This releases much pressure from giant Japanese automotive and electronics manufacturers, making their goods more affordable abroad. Let’s call this a currency limbo.
The results so far: There were some immediate changes in the exchange rate, but recent dips in both countries’ financial markets deemed the efforts a wash and we’re back to ground zero.
But what does this mean for American expats in Japan? It’s very nice. Simply, expats’ salaries are overvalued. Expats such as myself who send money home will see a sweet price for their earned yen. Anyone with loans or debt will enjoy this exchange rate for a while.
For example, anyone sending 50,000 yen to the US will get around around $647. The spending power of 100 yen is roughly the same as $1.
But some must be warned. Investing with this strong currency in the US will yield the same return and inflation in Japan might eventually occur as a result of adding money to the economy. This is a short-term, yet substantial benefit for expats.
