Low yen spurs wildest dreams of Hong Kong people

Ben Kwok May 04, 2022 11:27

Life is always a mismatch. We have waited 20 years for yen to come down to a low level but only few could have the luxury of traveling to Japan due to the pandemic.

But of course that does not stop the Japan-loving Hong Kong people to queue up for yen in hopes that they could spend it all one day.

But nobody knows if this means the end of the weak yen, which dipped to a 20-year low at around HK$6 per 100 yen, down from the usual level of HK$7+ per 100 yen. Yen fell about 13 per cent year-to-date.

Economists warned that there might be more weakness as the US rate is entering the upcycle, which could continue to hurt yen and other currencies.

That begs a question: How can one benefit from the falling yen?

One might think Japanese cars such as Toyota and Honda might be cheaper, and so are the Japanese imports of ASICS or Muji, but there is usually a long time lag before the actual price comes down.

Observers said prices for expensive Japanese fruits might be softer to reflect the falling yen and the dropping demand from mainland visitors due to the closed border.

Property is a more direct play given its long-term nature with potential leverage. To many Hong Kong people, the price of Japanese property is comparable to Zhongshan or Foshan residential market in Greater Bay Area – and it is a no-brainer which market they would choose.

Recently I visited a property fair of a few Japanese property projects in Tokyo, Osaka and Hokkaido. The fair advertised with a catchy headline of buying a Japanese home starting at over HK$700,000 but the units for sale were at least HK$1.4 million. In fact, the villa units were priced at over HK$15 million.

Interestingly all three projects offered a yield of around 6.5 per cent with an extra option to lease back to the seller at a rental rate about half the current market price. This looks like a sweet offer given the low exchange rate similar to a 15 per cent discount.

Furthermore, the price per square foot works out to be around HK$6,000, a substantial discount to the Greater Bay Area, not to mention the local home market.

It also comes with a kicker that the buyer is entitled to eight days of free stay every year in the first five years because the seller is also a licensed Airbnb operator. That appeals to buyers who treat Japan as their second home. The catch of course is the language and tax which we all know are all complicated.

If buying Japanese property is a bit too complicated, Japanese stocks might be easier. Stocks with export exposure are natural choices. Listed companies in Hong Kong with Japanese exposure include Aeon Stores and Fast Retailing.

Good luck to your bargain hunting.

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Ben Kwok

EJ Insight writer