Common Techniques for Exchanging USD to JPY
You may find yourself holding USD cash for some reason while living in Japan.
Since you need JPY to live in Japan, you'll need to exchange your USD, but how can you do it most cost-effectively?
We've investigated the current situation in 2022.
Premise
When exchanging USD to JPY, a fee called the exchange fee is added to the exchange rate.
This fee varies by company, and the lower it is, the more beneficial it is.
For example, if the exchange fee is 1 JPY per 1 USD, and the market rate is 1 USD = 140.0 JPY, you'll get 139.0 JPY when exchanging USD to JPY, resulting in a 1 JPY loss.
You might think 1 JPY is negligible, but as the amount increases, the impact of the fee becomes more significant.
When exchanging 10,000 USD (approximately 1,430,000 JPY), the fee would be 10,000 JPY, and for 100,000 USD (approximately 14,300,000 JPY), it would be 100,000 JPY, proportional to the amount.
Another point to consider is the fee for transferring USD to another account.
This means that if you move your USD to another account to process it cheaply, you might end up paying a lot of fees.
The four main types of fees are transfer fees, receipt fees, correspondent charges, and lifting charges.
Transfer fees are charged by the sender's side when sending USD.
Receipt fees are also charged by the recipient's side, which is easy to understand.
Correspondent charges are troublesome, as they vary depending on the bank used for the transfer.
Banks with strong foreign exchange capabilities have correspondent contracts with many banks, so they often don't charge correspondent fees.
You'll need to investigate and find out which banks don't charge these fees.
Domestic USD transfers within Japan are unlikely to incur these fees.
Lifting charges are a type of transfer fee charged when sending the same currency.
When sending USD and receiving USD, the bank doesn't charge an exchange fee, so they make up for it with this fee.
Considering these points, we'll investigate the best methods for exchanging USD to JPY, assuming you already have a USD account in Japan.
The Easiest Method - Exchanging at a Bank
The easiest method is to use the exchange service provided by the bank where your USD account is held.
For example, SBI Bank offers a 6 JPY exchange fee for foreign currency exchange.
Once exchanged to JPY, you can use it as JPY, withdraw it, or pay with a credit card.
If you use a major bank or a bank that's not strong in foreign exchange, this cost will skyrocket.
Major banks like Mitsui Sumitomo charge 50 JPY, and Mitsubishi UFJ charges 25 JPY.
Rakuten Bank charges 25 JPY, and au Jibun Bank charges 25 JPY for one-way foreign currency exchange.
If you choose a net bank for a more cost-effective option, SBI Bank's 6 JPY, Shinsei Bank's 7-15 JPY (rank-based), and Sony Bank's 4-15 JPY (rank-based) are good options.
To get 7 JPY at Shinsei Bank, you need to meet certain conditions, such as maintaining a certain balance for a few months.
Sony Bank's 4 JPY requires a monthly evaluation, which will be implemented two months later.
Additionally, you'll get a 2% cashback debit card.
The conditions are that you need to hold at least 1,000,000 JPY in foreign currency or investments, and the interest rate for time deposits is not bad, so it's a good option.
Note that Sony Bank and Shinsei Bank are less likely to charge additional fees like correspondent charges and lifting charges, making them a solid choice for foreign currency exchange.
They also offer free foreign currency transfer fees depending on the rank, making them a comprehensive and cost-effective option for foreign currency transactions.
Summary So Far
As of 2022, the most cost-effective option is SMBC Trust Bank's (Prestia) cross-currency transaction.
Prestia is a rebranded Citibank, which is strong in foreign exchange.
According to their website, "If the transaction amount is over 100,000 JPY or if you're a Prestia Gold customer, the exchange fee will be discounted."
In other words, the exchange fee for foreign currency to JPY is 0 JPY.
This can be very cost-effective if used properly.
However, Prestia has some drawbacks, such as a maintenance fee if you don't have a balance, and a 5,000 USD/day limit for foreign currency deposits.
Domestic foreign currency transfers also incur a 4,000 JPY fee.
This is a high-maintenance account, so you need to consider it comprehensively.
A More Convenient Method - Using Foreign Currency Exchange Apps
Some foreign currency exchange and payment apps offer more cost-effective methods.
One well-known app is Wise (formerly Transferwise), which is convenient for international money transfers.
It converts currencies and transfers them to your domestic account, making it a convenient service.
The exchange fee is negligible, and they prioritize transparency.
However, for USD to JPY exchange, the fee is 0.41%, which is relatively high.
For 1 USD, the fee is approximately 59 JPY.
Another well-known app is Revolut, which supports multiple currencies.
Although I couldn't find a way to deposit USD, I'll outline their specifications.
Revolut has a subscription-based system with different benefits.
Free members don't pay exchange fees, but if they exceed 750,000 JPY/month, they'll be charged 0.5%.
Premium members pay 980 JPY/month, which removes this limit.
Although they've recently increased their fees, they might still be useful if used properly.
The Best Method - Using FX Companies
FX companies are experts in foreign currency exchange.
They offer narrower spreads than banks and securities companies, and their rates follow real-time market rates, making it less likely to be ripped off.
By using FX companies, you can exchange currencies using the "spot" system.
In FX terms, "spot" means exchanging currencies at the current market rate.
This is also called "cash exchange" and is useful when you need a large amount of cash.
Although cash needs have decreased with the increasing use of cards, it's still a convenient method.
The fees involved in using FX companies are spreads and various fees.
These fees vary by company, so we've summarized the main companies.
| Company | USD/JPY Spread | Fee |
|---|---|---|
| 外貨ex by GMO | 0.2 JPY | - |
| セントラル短資FX | 0.2 JPY | 10 JPY |
| Money Partners | 0.3 JPY | 10 JPY |
| マネックス FX Plus | 0.2 JPY - | 20 JPY |
The spread is a publicized value, so it's not a major concern.
What's important is the fee.
Most FX companies charge fees for spot exchange, making it less cost-effective than using SBI Bank or other banks.
However, 外貨ex by GMO is the only company that doesn't charge fees, and its minimum unit is 1,000 currency units, making it easy to handle.
What 0.2 JPY Spread Means
Let's take a look at the loss due to the spread.
Simply put, it means you'll lose 0.2 JPY when exchanging 1 USD.
Although the amount is small, it's significant when exchanging large amounts.
For 500 USD, you'll lose 1 JPY, and for 10,000 USD, you'll lose 20 JPY.
For 100,000 USD, you'll lose 200 JPY.
It's cheap!
Conclusion
In conclusion, as of 2022, using 外貨ex by GMO to exchange USD to JPY is the most cost-effective and convenient method.
If you're sending a large amount or need to exchange USD frequently, using a bank might be more cost-effective.
From the start, using SBI Bank, Sony Bank, or Shinsei Bank can help you exchange USD to JPY at a lower cost.
Sony Bank and Shinsei Bank are also convenient for foreign currency exchange and transfer.
What I Actually Did
I used the foreign currency transfer service to send USD from Sony Bank to 外貨ex and exchanged it to JPY.
The result was that I got the market rate without any fees, and the JPY was deposited into my bank account.
It was a smooth and cost-effective exchange.
