How to hedge yen risk when buying in Japan?

Authored by the expert who managed and guided the team behind the Japan Property Pack

Everything you need to know before buying real estate is included in our Japan Property Pack

Who is the author of this content?

BAMBOOROUTES

A team specialized in real estate investing in APAC countries (Japan, Thailand, Indonesia, Australia, etc.).

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Japan. If you'd like to learn more about us, you can check our presentation page.

How this content was created 🔎📝

At BambooRoutes, we explore the Japanese real estate market every day. Our team doesn't just analyze data from a distance—we're actively engaging with local realtors, investors, and property managers in cities like Tokyo, Osaka, and Kyoto. This hands-on approach allows us to gain a deep understanding of the market from the inside out.

These observations are originally based on what we've learned through these conversations and our observations. But it was not enough. To back them up, we also needed to rely on trusted resources

We prioritize accuracy and authority. Trends lacking solid data or expert validation were excluded.

Trustworthiness is central to our work. Every source and citation is clearly listed, ensuring transparency. A writing AI-powered tool was used solely to refine readability and engagement.

To make the information accessible, our team designed custom infographics that clarify key points. We hope you will like them! All illustrations and media were created in-house and added manually.

How much of the purchase price will you need to convert from your home currency into yen?

You need to convert the full purchase price plus all associated fees and taxes into yen when buying Japanese property.

The total amount includes the property price itself, plus acquisition tax (typically 3-4% of assessed value), registration fees (0.4-2% of property value), real estate agent commissions (3% plus ¥60,000 plus consumption tax), and legal fees if using a lawyer.

For a ¥50 million Tokyo apartment, expect to convert approximately ¥52.5-55 million total when including all fees and taxes. This represents roughly 5-10% above the base property price depending on the specific transaction.

It's something we develop in our Japan property pack.

When exactly will you need to make the payments in yen — upfront, in stages, or only at closing?

Japanese property purchases follow a structured payment timeline with specific yen conversion requirements at each stage.

The initial earnest money deposit (typically 5-20% of purchase price) must be paid in yen when you sign the sales contract. This demonstrates serious intent and secures the property.

The remaining balance, along with all fees, taxes, and registration costs, becomes due at the final closing before property handover. You cannot delay or split this final payment.

For new construction properties, developers may require staged payments during construction, each requiring yen conversion at specific milestone dates. Plan your currency conversion strategy around these fixed deadlines.

What is the current exchange rate between your home currency and the yen, and how has it moved over the past 6 to 12 months?

As of September 2025, major currency exchange rates against the yen show relatively stable patterns with minor fluctuations.

The US dollar currently trades at approximately 147 yen per dollar, representing a 1.45% increase over the past month but a 0.61% decrease over the past year. The Thai baht maintains around 4.54 yen per baht with similar stability.

Recent volatility has remained within 1-2% ranges for major currencies over the past six months, indicating relatively calm FX markets. However, this stability shouldn't be assumed to continue indefinitely.

Economic factors including Bank of Japan monetary policy, global interest rate differentials, and trade balances continue to influence yen strength. Monitor these trends closely when planning your purchase timeline.

How much would a 5% or 10% shift in the yen exchange rate change the total cost of your property purchase in your home currency?

Exchange rate movements directly impact your total property cost in proportion to the percentage change.

Exchange Rate Scenario	USD Cost (¥20M Property)	USD Impact vs Base Rate
Current Rate (147 yen/USD)	$136,054	Base scenario
5% Weaker Yen (154.35 yen/USD)	$129,574	$6,480 savings
10% Weaker Yen (161.7 yen/USD)	$123,695	$12,359 savings
5% Stronger Yen (139.65 yen/USD)	$143,247	$7,193 extra cost
10% Stronger Yen (132.3 yen/USD)	$151,170	$15,116 extra cost

For precise calculations, multiply your total yen cost by the new exchange rate. A stronger yen increases your costs, while a weaker yen reduces them proportionally.

Does your bank or broker in Japan offer forward contracts so you can lock in today's exchange rate for a future payment date?

Many Japanese banks and international FX brokers offer forward contracts to lock in current exchange rates for future payment dates.

Major Japanese banks like SMBC, Mizuho, and MUFG typically provide forward contracts for property purchases, especially for foreign clients. These contracts require no upfront payment but may need minimum transaction amounts.

International brokers and specialist FX providers often offer more competitive rates and flexible terms than traditional banks. Companies like Wise, XE Money Transfer, and dedicated property FX services specialize in large real estate transactions.

Forward contracts work best when you have fixed payment dates, such as contract signing and closing dates. The longer the forward period, the wider the spread you'll typically pay.

What are the costs and minimum amounts required if you use currency options to protect against a weaker home currency versus the yen?

Currency options provide maximum flexibility but come with upfront premium costs that can be substantial for property transactions.

Premium costs typically range from 1-3% of the transaction amount for 3-6 month options, depending on volatility and strike price selection. For a $100,000 equivalent transaction, expect to pay $1,000-3,000 upfront.

Minimum transaction amounts usually start at $25,000-50,000 equivalent, making options unsuitable for smaller purchases. Banks often require higher minimums than specialist FX providers.

Options work best when you need protection against adverse moves but want to benefit from favorable ones. However, the premium cost must be factored into your total acquisition cost calculation.

It's something we develop in our Japan property pack.

Can you set up a multi-currency account in Japan to gradually exchange funds over time instead of all at once?

Several Japanese banks offer multi-currency accounts that allow gradual currency conversion, helping smooth out exchange rate volatility.

Major international banks in Japan like Citibank, SMBC Trust Bank, and Rakuten Bank provide multi-currency services for qualifying customers. These accounts let you hold foreign currency and convert portions to yen over time.

This strategy, called dollar-cost averaging, can reduce the impact of short-term volatility by spreading conversions across multiple dates. You might convert 25% of your funds monthly over four months leading up to purchase.

Account fees, minimum balance requirements, and conversion spreads vary significantly between providers. Compare total costs including monthly fees, exchange spreads, and wire transfer charges before committing.

What transaction fees and spreads will your bank or broker charge you for converting into yen compared to specialist FX providers?

Traditional banks typically charge higher total costs than specialist FX providers for large property-related currency conversions.

Provider Type	Typical Spread	Additional Fees
Japanese Megabanks	0.5-2 yen per unit	Wire fees, intermediary charges
Regional Japanese Banks	1-3 yen per unit	Higher processing fees
International Banks	0.3-1.5 yen per unit	Account maintenance fees
Specialist FX Providers	0.1-0.8 yen per unit	Lower or no wire fees
Online FX Services	0.05-0.5 yen per unit	Minimal additional costs

For a $100,000 conversion, the difference between bank and specialist provider costs can range from $500-2,000. Always request detailed fee breakdowns and compare total costs, not just advertised spreads.

How will mortgage repayments in Japan be structured — in yen only or can you borrow in your home currency to reduce exposure?

Japanese mortgage repayments must almost exclusively be made in yen, regardless of your home currency or income source.

Local banks rarely offer foreign currency mortgages, and those that do charge significantly higher interest rates with additional risk premiums. These products often prove more expensive than yen mortgages with currency conversion.

Your monthly mortgage payments, property taxes, management fees, and insurance premiums will all be denominated in yen. This creates ongoing currency exposure beyond your initial purchase.

Plan for regular currency conversion to service debt and property costs. Consider this ongoing exposure when calculating your total currency risk, not just the purchase price conversion.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Japan versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

Do you plan to rent out the property, and if so, will the rental income in yen help naturally offset your currency exposure?

Rental income provides a natural hedge against currency risk by generating yen cash flows to offset your yen-denominated expenses.

Tokyo rental yields typically range from 3-5% annually, while Osaka and other major cities may offer 4-6% yields. This yen income helps cover mortgage payments, property taxes, and management costs without currency conversion.

The hedging effectiveness depends on your rental yield versus total carrying costs. If rental income covers 60-80% of your annual yen expenses, it significantly reduces your ongoing currency exposure.

Consider vacancy periods and rental market cycles when calculating hedge effectiveness. Tokyo residential vacancy rates average 8-10%, meaning rental income may not provide consistent monthly hedging.

What level of yen reserves or emergency buffer would you keep on hand in case the exchange rate moves sharply against you?

Maintain a yen reserve buffer of 5-10% of your total expected costs to handle adverse exchange rate movements and unexpected expenses.

For a ¥50 million property purchase, consider keeping ¥2.5-5 million in yen reserves. This buffer covers potential exchange rate shifts, additional fees, or delays in closing that require extended currency exposure.

Store these reserves in a Japanese yen savings account or short-term deposit to earn some return while maintaining liquidity. Avoid investing reserves in volatile instruments that could amplify your currency risk.

Review and adjust your buffer size based on exchange rate volatility and your risk tolerance. During periods of higher volatility, consider increasing your buffer temporarily.

Which combination of strategies — forwards, options, gradual conversions, or natural hedges — best balances cost, flexibility, and peace of mind for your situation?

A combined approach typically offers the best balance of cost, flexibility, and risk management for most property buyers.

1. **Use forward contracts for fixed payment dates** - Lock in rates for your deposit and closing payments where timing is certain2. **Employ gradual conversion for flexible amounts** - Dollar-cost average a portion of your funds over 2-4 months before purchase3. **Leverage rental income for natural hedging** - If buying to rent, use yen income to reduce ongoing currency exposure4. **Maintain a yen reserve buffer** - Keep 5-10% of costs in yen for unexpected rate movements5. **Choose specialist FX providers for large conversions** - Save on spreads and fees compared to traditional banks

It's something we develop in our Japan property pack.

This strategy minimizes costs while providing protection against major adverse moves and maintaining flexibility for timing adjustments. Adjust the mix based on your risk tolerance and transaction specifics.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. Tokyo Portfolio - Hidden Costs Buying Property in Japan
2. Japan Property - Guide to Buying Properties
3. Second Home Japan - Procedures and Costs
4. Real Estate Tokyo - Funds Remittance
5. Wise - THB to JPY Rate History
6. Trading Economics - Japan Currency
7. Ibanista - Forward Contract Protection
8. INA Group - Japan Real Estate Guide