Common Techniques for Exchanging USD to JPY
When living in Japan, you may occasionally hold physical USD due to various reasons. Since JPY is necessary for living in Japan, it is essential to exchange USD to JPY. However, it is crucial to do so at the best possible rate. We have investigated the current situation in 2022.
Premise
When exchanging USD to JPY, a commission fee (exchange commission) is added to the exchange rate. This fee varies by company, and a lower fee is more beneficial. For example, if the fee is 1 JPY per 1 USD, and the market rate is 1 USD = 140.0 JPY, the exchange rate would be 139.0 JPY, resulting in a loss of 1 JPY. Although this may seem like a small amount, the impact increases as the amount grows. For instance, exchanging 10,000 USD (approximately 1,430,000 JPY) would result in a commission fee of 10,000 JPY.
Another important consideration is the fee for transferring USD to another account. This includes the sending fee, receiving fee, correspondent charge, and lifting charge, which are the four major fees.
The sending fee is charged by the bank when sending USD. The receiving fee is also charged by the receiving bank. The correspondent charge is troublesome, as it varies depending on the bank used for the transfer. Banks with strong foreign exchange capabilities have correspondent contracts with various banks, which often eliminates the correspondent charge. This can be confirmed by checking online reviews or asking the bank directly. The lifting charge is a type of sending fee charged when sending the same currency.
Considering these fees, we will investigate the best method for exchanging USD to JPY, assuming that the USD is already in a domestic bank account.
The Easiest Method - Exchanging at a Bank
Although this method may not be the most cost-effective, it is convenient and suitable for specific cases.
The simplest method is to use the foreign exchange service provided by the bank where the USD is held. For example, SBI Bank offers a foreign exchange service with a commission fee of 6 JPY. Once exchanged to JPY, the funds can be used for various purposes, such as withdrawing cash or paying credit card bills.
However, if you use a major bank or a bank with weak foreign exchange capabilities, the commission fee can be significantly higher. For instance, Sumitomo Mitsui Banking Corporation charges 50 JPY, while Mitsubishi UFJ Bank charges 25 JPY. Rakuten Bank and au Jibun Bank also charge 25 JPY for exchanging USD to JPY.
If you prefer to use an online bank, SBI Bank's 6 JPY commission fee is relatively low. Shinsei Bank charges 7-15 JPY (depending on the rank), while Sony Bank charges 4-15 JPY (depending on the rank). To qualify for the 7 JPY commission fee at Shinsei Bank, you need to meet certain conditions, such as maintaining a certain balance for a few months. Sony Bank's 4 JPY commission fee requires a monthly evaluation, which will be implemented two months later. Additionally, Sony Bank offers a 2% cashback debit card, which can be beneficial if you meet certain conditions, such as holding 1,000,000 JPY or more in foreign currency or investments.
Summary up to this point
As of 2022, the most cost-effective method is to use SMBC Trust Bank's (Prestia) cross-currency trading service, which offers a 0 JPY commission fee. However, this service has some limitations, such as a 5,000 USD daily limit and a 4,000 JPY fee for domestic foreign currency transfers.
Next, Sony Bank's Platinum status (4 JPY commission fee), SBI Bank's 6 JPY commission fee, and Shinsei Bank's 7 JPY commission fee are also competitive options.
A More Convenient Method - Using Foreign Currency Conversion Apps
Some foreign currency conversion apps offer relatively cost-effective methods for exchanging USD to JPY.
One well-known app is Wise (formerly TransferWise), which provides a convenient service for sending money abroad. Although the exchange commission is relatively low, it charges 0.41% for exchanging USD to JPY, which is approximately 59 JPY per 1 USD.
Another popular app is Revolut, which offers a subscription-based service with varying benefits. While the free plan does not charge an exchange commission, it has a limit of 750,000 JPY per month. Exceeding this limit incurs a 0.5% commission fee. The premium plan, which costs 980 JPY per month, eliminates this limit.
The Best Method - Using FX Companies
FX companies are specialized in handling foreign currencies and offer more competitive exchange rates than banks.
By using an FX company, you can exchange USD to JPY through a system called "spot exchange" or "cash exchange." This method allows you to exchange currencies at a more favorable rate than banks. The fees involved are the spread and various commission fees, which vary by company.
| Company Name | USD/JPY Spread | Commission Fee |
|---|---|---|
| Foreign Currency ex by GMO | 0.2 JPY | - |
| Central Short-Term FX | 0.2 JPY | 10 JPY |
| Money Partners | 0.3 JPY | 10 JPY |
| Monex FX Plus | 0.2 JPY | 20 JPY |
The spread is relatively low, but the commission fee is a significant factor. Among these companies, only Foreign Currency ex by GMO does not charge a commission fee. Additionally, the minimum exchange unit is 1,000 units, making it a convenient option.
What is a 0.2 JPY Spread?
A 0.2 JPY spread means that exchanging 1 USD incurs a loss of 0.2 JPY. Although this may seem like a small amount, it can add up for larger transactions.
Conclusion
As of 2022, using Foreign Currency ex by GMO to exchange USD to JPY is the most cost-effective method. If the amount is small or you need to send money abroad, using a bank or foreign currency conversion app may be more convenient. Initially, using SBI Bank, Sony Bank, or Shinsei Bank may be a good option. These banks are suitable for exchanging foreign currencies and offer relatively low commission fees.
Actually Trying it Out
We actually tried using Sony Bank's foreign currency transfer service to send USD to Foreign Currency ex by GMO and exchange it to JPY. The result was that we were able to exchange the currency at the market rate without incurring any commission fees. The process was smooth and convenient.
