Why Japanese Banks Are The Worst

Japanese banks have really low interest rates for investing. For a regular savings account, you’re paid 0.001% p.a. That means, for every $10,000, the bank gives you 10 cents. If I were still in primary school back in 1990, that could give me 1 popsicle a year, but too bad, water prices have gone up, so no more 10-cent treats for you. Yes, I can get an umaibo stick treat here with 10 yen but even with the current weak Japanese yen, that still costs 12 cents. You can still get your treat if you give me two cents worth of your opinion on this but that’s extra work for you.

The best rate I could find this past 8-over years is one by GMO at 0.20% but that is a fixed deposit account. Oh the blasphemy. How dare they give under 1% for fixed deposit. But I’ve known about the ridiculously unattractive rates in Japan for years now so that shouldn’t be any trigger to prompt me to write about this. And yes, you’re right.

What prompted me to write about this was an email I received from SMBC Trust Bank today.

Let me pick out the important details below.

Benefit 1: 2.0% p.a. (1.59% after taxes)
Benefit 2: FREE foreign exchange commission (normally 1 yen per USD/AUD)

Wow! 1.59% by simply changing my money into USD/AUD and FREE conversion of the currency!? What a great deal!

I hope you can sense my sarcasm above. If not, it’s coming…

Let’s take a look at the example they gave: Depositing US$50,000 into a 12-month Foreign Currency Time Deposit using the campaign gives you $795 at first maturity (which is exactly 1.59%). And at 110 yen to the dollar, that’ll give you 87,450 yen. Sounds like a good deal, doesn’t it? It is, until you read the fine print right at the bottom.

The TTB rate, which includes the normal 1 yen foreign exchange commission, will be applied when converting the foreign currency back to yen after the maturity date.

FYI, the TTB rate refers to the exchange rate at which a foreign currency is converted to yen (the other direction is known as the TTS rate). So when you want to convert your capital + earnings of US$50,795 back to yen, you’ll have to pay 1 yen per USD. That makes it 50,795 yen.

Assuming zero spread both ways and zero currency fluctuation, your profit will be 87,450 – 50,795 = 36,655 yen. At 110 yen to the dollar, your capital of US$50,000 would be 5,500,000 yen. That means, your profit for taking the currency risk and locking over 5 million yen into the time deposit for 12 months is…

*drum roll*

*drum roll some more*

*drum roll a bit more*


No, thank you SMBC.


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