Recently, many friends have asked me: is it more cost-effective to exchange for Japanese Yen than for Renminbi? After taking a close look, I realized this is actually a very good question.

On the surface, Japanese Yen may seem like nothing more than “spending money” for overseas travel, but in reality it has long evolved into an asset that combines both hedging and investment value. Especially now, as global economic uncertainty is increasing, many investors have been quietly allocating into Japanese Yen.

Let’s first talk about why Japanese Yen is worth paying attention to. The Japanese Yen is one of the world’s three major safe-haven currencies, alongside the US dollar and the Swiss franc. Japan’s economy is stable, and its debt is relatively manageable. Whenever anything unsettles the market, funds tend to flow into Japanese Yen as a safe haven. During last year’s Russia-Ukraine conflict, I saw the Yen rise by 8% in a single week, which directly helped cushion the decline in the stock market. For Taiwanese investors, this is not just for fun—it’s a tool to hedge risks in Taiwan’s stock market.

Next is interest-rate arbitrage. Japan has long maintained ultra-low interest rates (only 0.5%), while US interest rates are as high as about 4.5%. This interest-rate spread becomes fertile ground for arbitrage trades. Many investors borrow low-interest Japanese Yen to exchange into higher-yielding US dollars. When risks rise, they close the position by buying back Japanese Yen—this is the classic arbitrage strategy. Compared with Renminbi investment options, Japanese Yen clearly has higher liquidity and stronger international recognition.

So what about the current exchange rate? The TWD to JPY rate is around 4.85, which means it has appreciated by nearly 9% compared with the 4.46 at the beginning of the year. This increase is already quite significant for investors, especially under pressure from TWD depreciation. The Bank of Japan has just raised interest rates to 0.75%, a 30-year high, and Japanese government bond yields have also jumped to 1.93%—both of these support the strength of the Japanese Yen.

But let me be clear: is it worth exchanging for Japanese Yen now? The answer is “yes, but in batches.” The Yen will still fluctuate in the short term, so it’s not recommended to exchange everything at once. Entering gradually can help you average your cost.

I’ve outlined four ways to exchange currencies. The most traditional is exchanging cash at a counter. The advantage is that it’s safe and reliable, but the downsides are the exchange-rate spread and high fees—on 50,000 TWD, you might lose about 1,500-2,000 TWD. If you have some experience with foreign exchange, exchanging online and storing funds in a foreign-currency account is more cost-effective, with an exchange-rate discount of about 1%, bringing the cost down to 500-1,000 TWD.

The method I recommend most is “online currency settlement + airport withdrawal.” It’s available through Taiwan Bank and Mega International, and there’s no handling fee. You can also specify an airport branch for the withdrawal, which is especially convenient to pre-arrange before you travel. Alternatively, you can simply use a foreign-currency ATM to withdraw anytime, 24 hours a day. The cross-bank fee is only 5 TWD, making it suitable for people who urgently need cash on short notice.

After you exchange into Japanese Yen, don’t just let it sit. I’ve seen many people exchange and then leave it untouched—that’s a waste. You could consider a Japanese Yen fixed deposit (annual interest rate 1.5-1.8%), a Japanese Yen insurance policy (guaranteed interest rate 2-3%), or buying a Japanese Yen ETF (such as Yuanta 00675U) with dollar-cost averaging. This way, you can hedge risks while also earning a bit of return. For those with a bolder mindset, you can try foreign-exchange swing trading to capture fluctuations in USD/JPY or EUR/JPY.

All in all, Japanese Yen is no longer just a travel currency. Whether you’re planning to visit Japan next year, or you want to move part of your funds into Japanese Yen as a hedge against TWD depreciation—so long as you follow the two principles of “exchanging in batches + having it allocated after you exchange,” you can minimize costs and maximize returns. For beginners, it’s suggested to start with online currency settlement or foreign-currency ATMs, and then gradually explore options like fixed deposits and ETFs. That way, you’ll not only have a more cost-effective trip, but also gain an extra layer of protection when the global markets are volatile.