The Best Way To Transfer Money To And From Japan

financial planner transfer money to and from japan

It just so happens that despite the best efforts of Japan’s policymakers, the Japanese Yen is historically strong at the moment. JPY has in the past been a safe-haven currency that investors flood to when there is fear elsewhere. Currently the strength of JPY relative to other currencies presents an attractive opportunity for foreign people living in Japan earning JPY to remit money to their home countries and exchange into their native currency. The rationale behind this is twofold; 1) the Japanese Yen will not maintain its strength forever and exchanging now enables you to buy more of your native currency and 2) irrespective of the fluctuations in value of your native currency, you will spend it one day anyway. So, whats the cheap, low cost way to transfer currency abroad? First, lets consider the component parts of any transfer.

The method of exchanging and remitting currency has changed little over the years. Essentially what happens is the broker/institution/bank will take your money, exchange it for an equivocal amount (or not…?) of the destination currency, and then send that to the account that you have designated. The provider will make money from this transaction in two ways.

1) The Rate / The Spread

  1. Lets pretend that 100 JPY buys 1 USD. The provider will offer you the rate of 101 JPY for 1 USD. They pocket the 1 JPY / 1% difference. On everything. Big or small.
    The size of the spread/charge will depend on the provider. Ever tried exchanging currency at a small kiosk on the street in a foreign country?
    You can bet that the spread was not 1%.

    2) The Flat Fee

    Many providers (especially banks) will charge a flat fee to exchange and transfer currency on top of the “spread”. As many people do not know about the existence
    of a “spread” in the first place it makes it easy to charge a fee for providing the service. In Japan this is commonly around 3,000 JPY per transfer.
    Imagine that you’ve sent 100,000 JPY to your USD account abroad.
    You’ve paid (at least) 1,000 JPY on the spread
    You’ve paid 3,000 JPY on the flat feeIn total you’ve paid 4%

    There is sometimes another participant in the transaction, and they want to be paid too…

    3) The Intermediary Bank

    When you send money across the globe, depending on how far away the destination institution is there may be a bank in the middle.
    This bank essentially passes the money between party A and party B. Commonly the teller at the bank will not be aware who the intermediary bank is in each case.
    Frustratingly, they will also not be able to tell you concretely how much the intermediary may charge.
    When the bully takes your lunch money, you are left with what you are left with.
    Intermediary banks sometimes take nothing. We have also experienced debits of 3,000 JPY. It’s case by case.
    Adding that to the cost makes the transaction extremely cost inefficient.


Best Banks To Send Money From Japan

Long-term residents of Japan will probably remember the Go-Lloyds remittance service which was relatively hassle-free and not overly expensive. Dealing with domestic Japanese banks offers a varying experience with different degrees of procedural complexity to downright backwardness. Following the failure of Lloyds to establish a full domestic banking presence  (Japanese banks don’t appreciate foreign competition- Why would the bully invite another one to his playground?) Go Lloyds was ultimately purchased by Shinsei Bank and now lives on as GoRemit. The fee is 2,000 JPY per transfer which is cheaper than other Japanese domestics, however, there most definitely is a spread to be paid. Intermediary participation is case by case. The rule of thumb is that if the money is going to the other side of the globe, then there is probably another pair of hands along the way. One issue that may be relevant to some people is that it currently only supports 12 currencies. This should present no problem for major pairs (JPY|USD, JPY|GPB, JPY|EUR etc.) but for some clients this may rule out the service entirely.

Again, there is not a single bank which does not offer FX exchange and remittance so feel free to shop around. Another thing to be aware of is that some banks are unable/unwilling to transfer certain currencies. For example, Bank A is unwilling to transfer JPY to your USD account abroad enabling you to receive the rate at the receiving bank and insist that you convert your JPY at Bank A using Bank A’s rate.  Another bank, Bank B, may be unwilling/unable to transfer PHP or INR or [insert non-major currency]. Generally, the non-major currency pairs also have less transaction volume and accordingly larger spreads which translates to larger cost for the client. Be careful to take all costs into account when shopping around.

Foreign Currency Remittance Specialists Working From Japan

Some FX brokerages are able to provide a cheap currency exchange service without the need for the client to actively trade currency. In fact, for a number of reasons we would recommend that you do not aim to speculate on FX prices. If you are going to use your Japan address to register you will be restricted to Japan based brokerages. If you have a foreign address you should be able to access all companies globally. FX brokerages offer better rates than banks as currency is the only line of business they participate in (more volume and better spreads) unlike banks who gain the majority of their revenue from lending activities.

Those of you that already have a financial adviser should inquire who the advisor uses. Commonly advisory companies will routinely make foreign currency transactions and the frequency and size of these remittances will be much larger than Joe and Jane Public, often securing preferential rates. This will often include the use of a custodian or other party who only deal with institutions, enabling the company to exchange currencies atomically close to the actual exchange rate, owing to the economies of scale. As a retail client your only chance to get close to these rates, saving you money, is to exchange your funds via your private bank or financial adviser who would presumably be willing to offer this service to their clients in aim of retaining your custom in their other areas of business which actually produce revenue.

In summary there is no one best solution for currency exchange and remittance and the environment will continue to change and become more cost efficient. Due to the sheer size of the forex market there is sufficient liquidity in major currency pairs to enable clients to bring fees down close to zero if they go via an institution. As is typically the case with all things financial, accessing solutions retail, or even worse via a bank, will sometimes prove to be costly- especially if the remittances are regular.

Sources and Further Reading

- GoRemit, Shinsei


- Mizuho Foreign Exchange Desk

- Bank Of Japan; Daily Foreign Exchange Rate Tracker