Travel to Japan soars as yen weakens against Australian dollar

One of the most popular destinations is now much cheaper. Here’s how to get more bang for your Aussie buck thanks to the weak yen.

The Aussie dollar’s strength against the Japanese yen has boosted Japan’s fast-growing popularity with travellers even further.

Our dollar is at a decade high against Japan’s currency, with each buck buying more than a hundred yen, largely thanks to ultra-low interest rates in Japan making other currencies more attractive.

For tourists, that means everything is cheaper in a nation that is already our fifth favourite destination and quickly gaining on numbers two and three, the US and UK. Indonesia and New Zealand are our two most popular destination countries, according to the Australian Bureau of Statistics.

The yen’s weakness reflects its official interest rate of 0.1 per cent, compared with 5.5 per cent in the US and 4.35 per cent in Australia, making it much less appealing for investors.

“It doesn’t historically get much better than this for Australia,” said IG market analyst Tony Sycamore of the Aussie-yen exchange rate.

A Shinto Pagoda in Japan. Picture: Getty Images

“If you like skiing and want to see Japan, now is the time to be doing it,” he said.

“People are looking to take advantage of the currency to book in a holiday.”

Mr Sycamore said Japan’s central bank had only just ended a period of negative interest rates, having battled deflation for decades.

“If you invest in the US or Australia you pick up a significant yield benefit – in this day and age it’s easy to move money around and benefit from interest rate differentials, and that is the primary driver for this yen depreciation,” he said.

ANZ senior economist Catherine Birch said currency moves affected travel decisions, and the Aussie dollar’s fall from parity with the US dollar in the early 2010s to about US66c today “adds almost half onto the cost of your trip”.

“Because the Australian dollar has appreciated quite a bit against the yen, that does make travel to Japan more attractive and cheaper,” she said.

“You can make your money last longer, you can go for a longer holiday and you can do more activities.”

Ms Birch said many Australians still wanted to travel overseas “because they missed out on a couple of years of it during the pandemic”.

“But we are also facing a squeeze on household incomes as well,” she said.

“I think making the most of peoples’ money when they do travel overseas is really front and centre.”

Global money transfer business Wise’s country manager, Tristan Dakin, said Japan was among Australians’ most popular destinations.

“Affordability is a critical driver when it comes to choosing a destination,” he said.

“In Tokyo, Japan’s capital – a meal for two at a mid-range restaurant costs around 7000 yen or $68, a bottle of domestic beer sets you back around 317 yen or $3 and a travel pass to explore more of Japan is only approximately 7400 yen or $72 for the whole month.”

Eating out in Tokyo is much cheaper than in Australia. Picture: Getty Images

Mr Dakin said travellers could get more bang for their buck by being aware of ATM fees and bank fees, using a multi-currency travel card where possible, and always opting to pay in the local currency.

“It’s guaranteed to be cheaper as you’re not letting the merchant do the exchange rate on your behalf,” he said.

Other currency specialists says people should avoid buying their foreign cash at airports, where costs are higher, understand foreign transaction fees, and prepay some travel costs to smooth out currency fluctuations.

FxPro senior market analyst Alex Kuptsikevich said the Bank of Japan had been “dramatically slow” in tightening monetary policy.

“After a rate hike in March, there was no further tightening as many expected,” he said.

Japan’s monetary authorities did not want the yen to rise, only to slow its decline so its exports remained competitive, Mr Kuptsikevich said.