Common Techniques for Exchanging USD to JPY

In life, for various reasons, one may end up holding physical US dollars (USD). To live in Japan, Japanese yen (JPY) is necessary, so it needs to be converted, but how can this be done as advantageously as possible? I investigated the current situation in 2022.

Premise

When converting USD to JPY, mainly an additional fee (exchange fee) is added to the exchange rate. This differs for each company, and the lower it is, the more advantageous it becomes. For example, if 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's calculated at 139.0 yen, resulting in a 1 JPY loss. You might think it's just 1 yen, 0.7%, but as the amount increases, the impact becomes non-negligible. For 10,000 USD (about 1.43 million yen) exchange, the fee is 10,000 yen, for 100,000 USD (about 14.3 million yen), it's 100,000 yen... the fee increases proportionally.

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

The sending fee is, as the name suggests, a fee charged by the sender when sending USD. The receiving fee is also straightforward, just charged on the receiving side. The correspondent charge is tricky, as it varies depending on the bank through which the remittance passes. Banks 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 look for reviews and try to discern. Probably, it shouldn't occur for domestic USD transfers. The lifting charge is also a type of remittance fee, but it's a fee incurred when sending the same currency. When sending USD and receiving USD, the bank doesn't generate exchange fee profit. Therefore, they skim off fees under this name.

Considering these, this time I'll investigate assuming USD is already in a domestic account.

The Easiest Method - Exchange at a Bank

The easiest method is often costly, but there are niche cases, so let's take a look.

The simplest method is to use the exchange service of the bank account where the USD is held. For example, at SBI Bank, foreign currency exchange can be done with a fee of 6 sen. When exchanged to yen, it can be treated as yen immediately. Of course, it can be withdrawn to other banks or used for credit card payments.

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

If choosing an advantageous net bank with this method, as mentioned earlier, SBI Bank's 6 sen, Shinsei Bank is 7-15 sen (ranked), Sony Bank is 4-15 sen (ranked). To get 7 sen at Shinsei Bank, an annual average judgment is required, which takes several months. Sony Bank's 4 sen is judged at the end of the month and implemented two months later, so if all goes well, it can be done with a lead time of just over two months. Also, it comes with a debit card that gives 2% cashback. The condition is to keep 10 million yen or more in foreign currency or investment trusts, and the interest rate on time deposits isn't too bad, so it fits this case, but consider comprehensively whether other investment methods might yield more profit.

Note that 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 solid choices for receiving foreign currency. Depending on the rank, foreign currency remittance fees may also become free, making them banks with high overall advantageousness for foreign currency processing.

So far, it seemed that recent net banks were winning, but major banks have an advantage in terms of strength in foreign currencies. The most advantageous I've found so far is SMBC Trust Bank (Prestia)'s cross-currency transaction. Prestia is originally a name change from Citibank, so it's strong in foreign currencies. It states, "For transactions with an amount equivalent to 1 million yen or more, or for Prestia Gold customers, the exchange fee is discounted." And remarkably, the exchange fee from foreign currency to yen becomes 0 yen. It seems quite advantageous if utilized.

However, with Prestia, there are account maintenance fees if there's no balance, a limit of 5,000 USD/day for free receipt, and domestic foreign currency remittance always costs 4,000 yen/transaction, 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 advantageous at 0 yen. However, exceeding 5,000 USD/day incurs fees for foreign currency deposits, so as the amount increases, you end up continuously depositing. If the amount is small to begin with, there's not much difference whichever you use, so the convenience is questionable.

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

For 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 advantageous methods.

A famous one is Wise (formerly Transferwise), which is convenient for overseas remittance. This converts the currency and then deposits it into overseas accounts ⇄ domestic accounts, which is convenient. The exchange fee is within a negligible range, prioritizing transparency. On the other hand, this time we have USD domestically, and for USDJPY conversion, a fee of 0.41% is charged. At about 59 sen per 1 USD, it's quite a high fee just for conversion.

Another famous one is Revolut, a multi-currency compatible payment app. Checking 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's benefits are divided by subscription. Even free members have no exchange fee, but exceeding 750,000 yen/month incurs a large fee of 0.5%. This limitation is removed with the premium membership at 980 yen per 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 well.

The Main Option - Using FX Brokers

When it comes to handling foreign currencies, it's FX brokers. They offer far narrower spreads than securities companies or banks. Also, because they basically follow the real-time market rate, there's less chance of being forced to exchange at strange prices.

When exchanging currencies using this, we use a system called physical delivery (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 for simplicity. If you need cash for overseas, you can do physical receipt and receive it at the airport. When you need a large amount, it's much more convenient than the exchange rate at airport exchange offices. Although the need for cash has decreased recently as cards can be used in many places, it might be an effective method depending on the country.

Now, we want to do physical delivery this time, but the fees involved are spreads and various fees. As they vary by broker, I've summarized the major brokers. Note that brokers that can't accept USD deposits have been excluded as they don't fit the purpose this time.

Broker Name	Nominal USDJPY 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 clustered and nominal values so they don't need much consideration, but the fees are noteworthy. Many brokers 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 currencies, 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. Cheap!

Summary

So, as of 2022, sending USD to Gaitame.com and doing physical delivery is considered the most convenient and advantageous method. 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 advantageously. Sony Bank and Shinsei Bank are banks that are easy to receive foreign currency, so if you can raise your rank well, they should be easy to use for foreign currency remittance and yen conversion as well.

I Actually Tried It

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