General techniques for exchanging USD to JPY

As we go through life, for some reason or another, we may end up holding physical US dollars (USD).
To live in Japan, Japanese yen (JPY) is necessary, so we need to convert to yen, but how can we do this as cost-effectively as possible?
I researched the current situation in 2022.

Premise

When converting USD to JPY, there is mainly a fee added to the exchange rate (exchange fee) that is incurred.
This differs for each company, and the lower it is, the more advantageous it becomes.
For example, let's say the fee is 1 JPY per 1 USD.
If the market rate is 1 USD = 140.0 JPY, when converting from USD to JPY, it would be calculated at 139.0 yen, resulting in a loss of 1 JPY.
You might think it's just 1 yen, 0.7%, but as the amount increases, the impact becomes impossible to ignore.
For an exchange of 10,000 USD (about 1.43 million yen), the fee would be 10,000 yen, for 100,000 USD (about 14.3 million yen), it would be 100,000 yen... the fee increases proportionally.

Another point to consider is the fee for transferring dollars to another account.
In other words, if you move money to process it more advantageously, you might end up paying a lot in fees and defeating the purpose.
The four main fees are remittance fee, receiving fee, correspondent charge, and lifting charge.

The remittance fee is, as the name suggests, a fee charged by the sender when sending USD.
The receiving fee is also straightforward, it's just charged on the receiving end.
The correspondent charge is tricky, as it varies depending on the bank through which the remittance passes.
Banks that are strong in foreign currencies often have correspondent contracts with various places, so they often don't go through other banks and don't incur correspondent charges.
This can't be known until you send it, so try to discern by looking for user reviews.
It probably won't be charged for USD transfers within the country.
The lifting charge is also a type of remittance fee, but it's a fee charged when sending the same currency.
When sending USD and receiving USD, the bank doesn't generate any exchange fee profit.
Therefore, they skim off fees under this name.

With these in mind, I'll investigate based on the premise that USD is already in a domestic account.

The easiest method - Exchange at a bank

The easiest method is often the most costly, but let's look at some niche cases.

The simplest method is to use the foreign exchange service of the bank account where the USD is held.
For example, SBI Bank offers foreign currency exchange with a fee of 6 sen.
If exchanged to yen, it can be treated as yen right away.
Of course, you can withdraw to other banks or make credit card payments.

If you use a major bank or a bank that doesn't focus on foreign currencies, this cost skyrockets.
Sumitomo Mitsui, a major bank, charges 50 sen, Mitsubishi UFJ charges 25 sen.
Rakuten Bank charges 25 sen, au Jibun Bank seems to charge 25 sen one-way for foreign currency to yen.

If choosing the most cost-effective online bank with this method, as mentioned earlier, SBI Bank's 6 sen, Shinsei Bank is 7-15 sen (depending on rank), Sony Bank is 4-15 sen (depending on rank).
To get 7 sen at Shinsei Bank, you need an annual average judgment which takes several months.
Sony Bank's 4 sen is judged at the end of the month and implemented the month after next, so if all goes well, it can be done with a lead time of just over 2 months.
Also, you get a debit card with 2% cashback as a bonus.
The condition is to have 10 million yen or more in foreign currency or investment trusts, and the interest rate on time deposits isn't too bad, so it aligns with this case, but consider comprehensively whether other investment methods might yield more profit.

By the way, Sony Bank and Shinsei Bank are banks where extra fees like correspondent charges and lifting charges are less likely to be added, so they are treated as a go-to for receiving foreign currency.
Depending on your rank, foreign currency remittance fees may also become free, making them banks with high overall cost-effectiveness for foreign currency processing.

Up to this point, it seemed that recent online banks were gaining the upper hand, but major banks have an advantage in terms of strength in foreign currencies.
The most cost-effective I've discovered so far is the cross-currency transaction of SMBC Trust Bank (Prestia).
To begin with, Prestia is a name change from Citibank, so it's strong in foreign currencies.
It states "For transactions of 1 million yen equivalent or more, or for Prestia Gold customers, the exchange fee is discounted." and amazingly, the exchange fee from foreign currency to yen becomes 0 yen.
It seems like it could be quite cost-effective if utilized.

However, with Prestia, there are account maintenance fees if you don't have a balance, a limit of 5,000 USD/day for free receipt, and a fixed fee of 4,000 yen/transaction for domestic foreign currency remittances, among other fees that can't be avoided even with status.
It's an account that's difficult to handle, so it seems necessary to judge comprehensively here as well.

Summary so far

As of 2022, Prestia is the most cost-effective at 0 yen.
However, if you exceed 5,000 USD/day, you'll incur fees for foreign currency deposits, so if the amount increases, you'll end up continuously depositing forever.
In the first place, if the amount is small, there's not much difference whichever you use, so the convenience is questionable.

Next comes Sony Bank's Platinum status (4 sen), SBI Bank's 6 sen, and Shinsei Bank's 7 sen.
These should be considered as candidates.

By the way, in the case of 4 sen, it's about 400 yen for 10,000 USD (about 1.43 million yen), and 4,000 yen for 100,000 USD (about 14.3 million yen).

A relatively easy method - Using foreign currency conversion apps

Among apps that provide overseas remittance and foreign currency settlement, there are also relatively cost-effective methods.

A famous one is Wise (formerly Transferwise), which is convenient for overseas remittance.
This is a convenient service that deposits into overseas accounts ⇄ domestic accounts after converting the currency.
The exchange fee is within a negligible range, emphasizing transparency.
On the other hand, in this case, we already have USD domestically, and for USD to JPY conversion, there's a fee of 0.41%.
At about 59 sen per 1 USD, it's quite a high fee just for conversion.

Another famous one is Revolut, a multi-currency payment app.
When I checked my own account, there seemed to be no way to deposit dollars, so it doesn't seem usable for this case, but I'll note the specifications just in case.

Revolut has different preferential contents based on subscription.
Even for free members, there's no exchange fee, but if you exceed 750,000 yen/month, a large fee of 0.5% is incurred.
This restriction is removed with the premium membership at 980 yen/month, so it might be usable.
Although there have been disadvantageous changes such as fees being charged for overseas remittance, it seems there might be uses if used skillfully.

The main option - Using FX providers

When it comes to handling foreign currencies, it's FX providers.
They offer far narrower spreads than securities companies or banks.
Also, since they basically follow the real-time market rate, it's less likely to be exchanged at strange prices.

When exchanging currencies using this, we use a system called physical delivery (physical receipt) and physical delivery.
In FX terms, physical receipt means receiving by converting from Japanese yen to foreign currency, and physical delivery means receiving by converting from foreign currency to Japanese yen.
It's sometimes called exchange with an easy-to-understand name.
If you need cash for overseas use, you can physically receive it and pick it up at the airport.
When you need a large amount, it's much better than the exchange rate at airport exchange offices, so it's convenient.
Recently, cards can be used in many places and the demand for cash has decreased, but it might be an effective method depending on the country.

Now, we want to do physical delivery this time, but the fees involved are the spread and various fees.
As they vary by provider, I've summarized the major providers.
Note that providers that can't deposit USD are excluded as they don't meet the purpose of this time.

Provider Name	Nominal USD/JPY Spread	Fee
Gaitame.com by GMO	0.2 sen	-
Central Tanshi FX	0.2 sen	10 sen
Money Partners	0.3 sen	10 sen
Monex FX Plus	0.2 sen -	20 sen

The spreads are bunched together and are nominal values, so they don't need much consideration, but what's noteworthy is the fees.
Many providers charge fees for physical delivery, and with these fees, it might be better to do it at SBI Bank, etc.
Among these, only Gaitame.com doesn't charge a fee.
Furthermore, the minimum unit is from 1,000 currency units, which is an easy-to-handle unit.

What does a 0.2 sen spread mean?

Let's also look at the loss incurred by the spread.
Simply put, it means it costs 0.2 sen to exchange 1 USD.
The amount is too small to understand easily, but it costs 1 yen for 500 dollars.

It's about 20 yen for 10,000 USD (about 1.43 million yen), 200 yen for 100,000 USD (about 14.3 million yen), and even for 1 million USD (about 143 million yen), it's only 2,000 yen.
That's cheap!

Summary

So, as of 2022, sending USD to Gaitame.com and doing physical delivery is considered to be a method that is both convenient and cost-effective.
If the foreign currency remittance fee is higher, or if the amount is small to begin with, exchange at the bank where it's deposited.
If you receive it at SBI Bank, Sony Bank, Shinsei Bank, etc. from the start, you can convert to yen relatively cost-effectively.
Sony Bank and Shinsei Bank are banks that are easy to receive foreign currency, so if you can skillfully raise your rank, they might be easy to use for foreign currency remittance and yen conversion as well.

I actually tried it

I sent money from Sony Bank to Gaitame.com using free foreign currency remittance, and converted it to yen.
As a result, it became yen at the rate I set a limit order for, and was withdrawn to the bank in Japanese yen.
No fees were charged at all up to this point, and the exchange was done cleanly at the limit order value.
Clean and simple.