24 August 2019
A weaker yen has boosted Japan travel demand in Hong Kong, with tours said to be fully booked for the Christmas season. Photo: Bloomberg
A weaker yen has boosted Japan travel demand in Hong Kong, with tours said to be fully booked for the Christmas season. Photo: Bloomberg

Do we benefit from falling yen and other Asian currencies?

Fancy having some sushi, kimchi, bubble tea or Hainan chicken on your overseas trip?

Well, the delicacies are all now effectively cheaper in their home nations and cities, thanks to the collapse in Asian currencies in the past two weeks.

The Japanese yen is at a seven year low, thanks to Tokyo’s quantitative easing, and the slide hasn’t stopped yet. Across the sea, the Korean won has fallen to a 15-month low. The picture is not much different in Taiwan and Singapore, whose currencies are hovering near four-year and three-year lows respectively.

It would have been called an Asian financial crisis 2.0, a replay of July 1997 when the Thai baht was devalued by 20 percent in a single day. Except this time, people are not worrying about it, and many are actually seeking to benefit from the new exchange rates by traveling overseas and snapping up bargains.

This is one of those times when Hong Kong people are glad to have a US dollar-pegged currency. A strong greenback boosts the value of the Hong Kong dollar in relation to other currencies, making overseas travel, shopping and dining cheaper.

However, one cause for concern is the stock market performance. The Hang Seng Index has in recent days been trailing other regional markets that have benefited from soft currencies. As equity values have a large correlation to consumption, it is essential that stocks do not suffer much. The Shanghai-Hong Kong Stock Connect program, meanwhile, has also lost steam after some initial excitement.

That said, these market developments have not curbed the demand for overseas travel.

All tours to Japan and Korea are reported to be fully booked for the Christmas period. Of course, the tours were in demand even in previous years as Hong Kong people are so fond of hot springs, chasing TV stars and perhaps take some cosmetic surgery, on top of the usual dining and shopping. But this year, the clamor was much greater as the tours have become cheaper.

But before we get carried away, we should keep one thing in mind: the effect of weak dollar on tourism consumption could be an over-statement.

Yes, visitors to Japan may have risen 19 percent in the first nine months. But those who think of reaping the benefits of a falling dollar tend to forget there is an 8 percent value added tax in Japan, offsetting most of the 11 percent drop in yen year-to-date.

Even in Hong Kong, it is rather doubtful what additional sales will be generated by Japan-linked local retailers such as snack shop 759, department store Yata and EGL Tours, whose shares are currently on offer.

The three retailers often spoke of the cheaper yen, and how sales were benefiting as consumers were seeking out bargains. Well, consumers are still paying more for most of the items because even as the retailers saved five percent on procurement costs, the savings were far outstripped by a double-digit increase in rental expenses.

In the same way, did you notice that Cathay Pacific and other airlines have not reduced their passenger fuel surcharge even though oil prices have fallen 20 percent since summer?

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EJ Insight writer

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