Korean savers bought 51.9 billion yen at almost exactly the price it trades at now

Divide the won spent by the yen bought and you get the cohort's cost basis. From July through Aug. 25, customers at the four biggest banks put 444.5 billion won into 51.9 billion yen ^[9], which works out to 856.46 won per 100 yen ^[1] against a noon spot of 857.13 ^[1]. Two months of buying every dip, and the average buyer is ahead by eight hundredths of a percent ^[2]. The trip home costs 1.5 to 2 percent in spreads and fees ^[12], so break-even sits near 870 to 874, which is 13 to 17 won above where the cross is now ^[3].

The stated aim is exchange-rate gains ^[14], meaning the whole return is the cross and none of it is yield, and the cross has two legs. One is Japan, where an expansionary fiscal stance and the U.S.-Japan rate gap are doing the work ^[7] and where a joint intervention to buy yen in late July was followed by the currency weakening past 160 per dollar anyway ^[8]. The other leg is Korea, and it is the one that gets read backwards: the dollar-won rate closed at 1,368.6, its lowest in about 13 months ^[5], which is the won at its strongest in 13 months rather than its weakest, on a Bank of Korea rate increase and dollar inflows from semiconductor exports, with foreign net selling of Korean shares easing ^[6].

The stock is the more interesting number, or rather the more interesting version of the flow story. Deposits at the five largest banks stood at 1.3456 trillion yen on Aug. 25 ^[10], about 11.5 trillion won at the Sept. 1 rate ^[4], clearing June 2024's record by 5.9 percent ^[5] and the 800 billion range of April last year, when the cross was still above 1,000, by roughly 68 percent ^[11][6]. Two months of exchange at 51.9 billion yen is only 3.9 percent of that pile ^[7], so most of the money in there was bought higher: someone who bought at last year's 937.49 is down 8.57 percent before costs ^[2] and about 10.3 percent after them ^[8].

The traveller and the investor are running different positions, even when they use the same app. Lee, the 34-year-old office worker who kept buying each time the rate fell below his last purchase, told Seoul Economic Daily he can spend the yen on travel ^[15], and a traveller never pays the return leg, so the 1.5 to 2 percent only bites the holder who intends to come back to won ^[12]. For that holder, fee-free rails moving up to 2 million won a day ^[13], about 233,000 yen at current levels ^[10], have made it easy to build something that needs two central banks to cooperate.

This is probably wrong, but what actually moves the trade is the pace of hikes, not the meeting itself. Scott Bessent told CNBC on Aug. 31 that a Bank of Japan increase is already in the price ^[16], while Reuters, citing sources, says the bank plans to move on the 17th and 18th and is weighing a faster pace than the roughly two increases a year it has kept to ^[17]. That faster pace is the part the market still hasn't priced. Against that, Hana Bank's Suh Jung-hoon argues the cross can fall further, with structural yen weakness intact and the won still firming on rates and growth ^[18], in which case the 857 buyers are early in exactly the way the 937 buyers were. What would settle it is a BOJ signalling more than two hikes alongside a BOK that pauses, because the trip back to early June's 970 range is 13.2 percent ^[9][3] and a 2 percent fee stops mattering at that size. (The same report cannot decide whether that 100-won fall took two months or three ^[3][4], which is its own measure of how fast it went.)