Japanese Yen Deposits Surge by US$1.31 Billion in One Month

Foreign currency deposits held by residents of South Korea have increased for the second consecutive month. The prolonged trend of a historically low value yen has led to a growing number of investors seeking to purchase yen at a favorable rate. Additionally, the increase in export earnings deposited by businesses has contributed to the overall growth of foreign currency deposits, including dollars and euros, held by residents.

According to “Trends in Foreign Currency Deposits of Residents in November” released by the Bank of Korea (BOK) on Dec. 19, the balance of foreign currency deposits in foreign exchange banks as of the end of last month reached US$101.76 billion, increasing by US$7.46 billion compared to the end of the previous month. Residents refer to domestic individuals, domestic companies, foreigners who have resided in the country for more than six months, and foreign companies that have established a presence in the country. After reaching US$105 billion at the end of July and experiencing a decline, foreign currency deposits have increased to the US$100 billion range for the first time in four months.

Breaking it down by currency, deposits in U.S. dollars saw the most significant increase, rising by US$5.95 billion compared to the end of the previous month. Deposits in yen and euros followed with increases of US$1.31 billion and US$180 million, respectively.

Notably, yen-denominated deposits saw a record-breaking increase last month, reaching a balance close to US$10 billion at US$9.92 billion. This marks the first time it has exceeded US$9 billion, representing a remarkable 62.3 percent increase compared to the same month last year when it was US$6.08 billion. The surge in yen deposits is attributed to individual investors who saw the historically low yen, with the exchange rate reaching 800 won (US$0.61) per 100 yen, as an investment opportunity. The previous record increase was in June, amounting to US$1.23 billion.

The BOK stated, “Investors’ deposits of securities firms and deposits of individuals have increased. The growth in investments due to the low yen and the increased demand for currency exchange related to travel to Japan have contributed to the rise.” The exchange rate between the won and the yen dropped from an average of 990.69 won per 100 yen in April to 872.93 won last month. This marks the lowest level in 15 years and 11 months since December 2007 when it was 829.17 won.

Breaking it down by entity, corporate deposits increased by US$6.54 billion, surpassing the growth in individual deposits which increased by US$920 million. Among banks, domestic banks saw an increase of US$7.66 billion, while foreign bank branches experienced a decrease of US$200 million.