FW-59 -- Foreign Currency Deposits: What and How?

J@pan Inc Magazine Presents:

* * * * * * * F R U G A L W A T C H * * * * * * * *
A weekly roundup of how to be frugal in the world's most
expensive country to live (unless you read this!), written
and compiled by Wendy J. Imura.

Regular edition, June 6, 2005 Issue No. 59

- What's new (Foreign Currency Deposits: What and How?)
- Event Notice: (Foreign Currency Deposit Options in Japan)
- Frugal tips (Debt Free Living)
- Credits

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===== Entrepreneur Association of Tokyo ========
2-Year Anniversary Panel Discussion "Raising Capital For Your
Business" The panelists will include Hitoshi Suga, Vice Chairman
and Board Member - Tully's Coffee Japan/FoodX Globe Co. LTD.
and Mike Alfant, President of Building 2. Our moderator will
be Michael Korver, Daiwa Securities Group Chaired Visiting
Associate Professor International Business Strategy for the
MBA program at Hitotsubashi University.
Date/Time: Tuesday, June 7th 7:00 pm
Location: City Club of Tokyo - Maple Room(Canadian Embassy Complex)
Language: English Website: http://www.ea-tokyo.com
Email: info@ea-tokyo.com

+++ WHAT'S NEW (Foreign Currency Deposits: What and How?)

Dear Frugal Readers,

Banking in Japan is a bit of a mystery to most foreign
residents. Most of us have a bank account or two, or
a Post Office account as well - ones that we use mostly
for the convenience of receiving our salaries, paying our
bills, and storing our money in a location safer than a
shoebox or a mattress. With interest rates so low for
regular Japanese bank deposits (0.01% usually, slightly
higher for certificates of deposits, or CDs), it might
seem that there are few domestic options for saving
money, particularly in a currency other than yen.

However, low interest rates have brought about a bit
of a boom recently in high-interest 'gaika yokin,' or
foreign-denominated currency deposits. Most of
the major 'city banks' (Mizuho, UFJ, Tokyo Mitsubishi,
and Sumitomo Mitsui) offer choices on foreign currency
deposits, and it is relatively simple to set up a foreign
currency term deposit or CD.

There are two main options: you can choose either a
lump-sum time deposit at a special interest rate
(i.e. set up a one-year term CD in dollars at 2 percent
annual interest), or a 'dollar-cost averaging' type of account
where you set aside a set amount of yen each month at
market rates . Type A is called a 'gaika teiki yokin
'(foreign-currency term deposit, very similar to a certificate
of deposit), while Type B is called a 'gaika tsumitate yokin'
(or monthly-withdrawal foreign-currency term deposit).
Usually the term for Type B accounts is also set.

The major thing to consider with these types of accounts
is that, while they do offer attractive interest rates (some
as high as 10% annually on a one-month term account
X 0.02 (2 percent interest
annually) X .80 <20 percent of interest income is taxed>).
In total, the dollar value of your 1 million yen in these terms
is $9,584.90 (US$ principal of $9,433.96 + $150.94 in interest).
Should you decide to exchange your funds back into yen at 115
yen/$, you would recieve a net forex gain of around 92,678 yen
(including fees). However, should the yen strengthen to 95 yen/$,
you would see a relatively equivalent loss. Your 'break-even
point' (including fees) in this scenario is 105.33 yen/$. Your
banker should be able to aid you in this calculation: ask for the
"soneki bunputen" (break-even point) forex rate (kawase reeto).

Hope this has been helpful!
Frugally yours,
Wendy J. Imura

PS: Some information gathered from the Fuji Sankei Group Living free
ICA June 16 Event
Speaker ・Crissman Loomis - Assistant VP, IT Dept, Provider
Group ・Manulife Insurance Japan
Topic ・ Vendors, Technology, and Japan!

RSVP required: complete event details at http://www.icajapan.jp/
Date: Thursday, June 16, 2005
Time: 6:30 Doors open, dinner included
Cost: 3,000 yen (members), 5,500 yen (non-members),
Open to all - Location is Foreign Correspondents'
Club http://www.fccj.or.jp/static/aboutus/map.php

+++ BARGAIN ROUNDUP: (Foreign Currency Deposit Options in Japan) ++++++

*Citibank (http://www.citibank.co.jp/en/index.html)
Citibank has long been a well-known choice in the foreign
currency deposit market. The bank offers one-year interest
rates of 1.75 percent on US dollar accounts, 2.45 percent
on Australian dollar accounts, 0.50 percent on euro
accounts, and 2.30 percent rates on British pound-
denominated accounts. It's fees are mid-range (2 yen per
two-way transaction for each currency unit), and you
also have the option English-language service (although I've
heard mixed reports about their customer service.)

*Sony Bank (http://moneykit.net/visitor/fx/fx00.html) Japanese only
This online bank offers 24-hour access to your account,
great interest rates, plus some of the most reasonable
handling fees in the business. It's 2.63125 percent
US dollar account (for accounts less than $10,000)
charges only 0.50 yen/$ per two-way transaction. Its
Australian dollar account boasts 4.43250 percent interest
and 0.50 yen/AU$ fees, and 3.601 percent for British
pound (0.50 percent/pound). The disadvantages: they
only offer online/telephone service, and their service
is in Japanese only.

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+++ FRUGAL TIPS (Debt-Free Living)
Still paying down a hefty credit-card balance incurred in another country?
Or, worse, are you just paying the monthly maintenance fee? If so, please
take a look at the latest Frugal Encyclopedia article on www.frugaljapan.com
on Debt-Free Living. It might help!
===== Entrepreneur's Handbook Seminar ======

Terrie Lloyd, founder of over 12 start-up companies in Japan
will be giving an English-language seminar and Q&A on starting
up a company in Japan. This is an ideal opportunity to find
out what is involved, and to ask specific questions that are
not normally answered in business books. All materials are
For more details: http://japaninc.com/handbook_seminar3/
Subscribers: 929 as of June 6, 2005

Written by: Wendy J. Imura (frugalwatch@japaninc.com)
Edited by: JI

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