Skift Take

The Japanese PM Abe successfully revived an export-led economy, but tourism is a fickle business and travelers could quickly turn elsewhere when the yen begins to climb again.

The Thai baht’s biggest quarterly gain against the yen since 1998 was enough reason for Kornkarun Cheewatrakoolpong, a 32-year-old economics lecturer in Bangkok, to change her honeymoon destination to Japan from Italy.

“It’s more affordable,” Kornkarun said in an interview from her home in the capital on April 17, after returning from a business trip to Japan. “I don’t feel it’s that expensive like in the past. I still expect that when I go for my honeymoon in November, the yen will remain weak.”

Kornkarun followed 36,000 Thai tourists who headed to Japan in the first two months of the year, 31 percent more than the same period of 2012 and the largest increase among five major Southeast Asian countries, according to data from the Japan National Tourist Organization. The baht, Asia’s best-performing currency in 2013, strengthened 14 percent versus the yen in the three months through March before rising a further 6.3 percent in April, making costs for accommodation, shopping and food cheaper for visitors from Thailand.

The rise in tourists caused a shortage of yen banknotes in Thailand, central bank Governor Prasarn Trairatvorakul told reporters in Bangkok on April 9, before the nation’s markets closed for the four-day New Year holiday, known as Songkran. The Bank of Japan’s monetary easing, coupled with increasing investment, helped drive the baht to the strongest against the yen in five years on April 22. Japan’s currency may weaken to 100 per dollar for the first time since 2009 by year-end, according to 54 analysts surveyed by Bloomberg.

Relatively Cheaper

Japan’s currency has depreciated 19 percent versus the greenback since mid-November, when Prime Minister Shinzo Abe, then running for office, began a campaign to talk down the value of the exchange rate to revive the export-led economy. The weaker yen boosts competitiveness of Japanese goods such as cars made by Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co.

The Bank of Japan announced April 4 it would buy 7.5 trillion yen ($76 billion) of debt a month, spurring outflows to higher-yielding assets. The BOJ’s benchmark interest rate is 0.1 percent, compared with the Bank of Thailand’s 2.75 percent.

The yen has weakened against all of the world’s 16 major currencies in 2013 and is leading losses in Asia, according to data compiled by Bloomberg. The exchange rate has declined almost 18 percent versus the baht this year, which if sustained would be the biggest annual drop since at least 1992.

“The yen’s weakness accelerated, especially against Asian currencies, and that encourages inflows of tourists,” Takahiro Sekido, a strategist in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., who formerly worked at the Bank of Japan, said in an April 22 telephone interview. “Things in other Asian countries are also getting more expensive, so when you shop in Japan and convert prices back to your own currency, people may feel things are much cheaper here.”

Reversal Signal

Bank of Thailand Governor Prasarn told reporters in Bangkok on April 19 that the baht’s advance has started to move beyond fundamentals. It reached 28.56 per dollar on April 19 and April 22, the strongest level since a devaluation in July 1997 that sparked the Asian financial crisis. The currency traded at 28.80 late yesterday, while one baht was buying 3.42 yen compared with 2.82 yen at the end of last year.

While ruling out imposing capital restrictions, Prasarn said on April 9 that the central bank stands ready to intervene should the currency move against fundamentals.

Some trading patterns show the baht is poised to fall. The dollar’s 14-day relative-strength index stayed below 30 between April 16 and April 22, a level that signals the greenback may be poised to rebound. Stochastics, which measure the price of a security relative to its highs and lows during a particular period, have fallen below 30 since March 12.

Passenger Traffic

Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents in Bangkok, predicts the number of tourists to Japan will increase 15 percent this year, without providing specific or historical numbers.

“Japan has always been a popular destination for Thai people, but the strong baht made it even more attractive,” Sisdivachr said in an April 17 telephone interview from Bangkok. “A lot of Thais are going to Japan for shopping and sightseeing as they feel they will spend less than before.”

The country’s national airline, Thai Airways International Pcl, saw the percentage of its seats filled for routes in Asia, including Japan, climb 7.6 percent in the first two months of the year to 76.8 percent, while those to Europe and North Pacific fell 3.2 percent and 6.6 percent, respectively, according to its website.

“We have seen rising numbers of Thai shoppers to Japan in the last couple of months,” Danuj Bunnag, executive vice president of Thai Airways, said in a phone interview from his office in Bangkok on April 22. “Bookings in the next few months are also looking good.”

78th Province

For Prapharat Tangkawattana, a 45-year-old chief financial officer, the weakening baht meant a 33 percent saving for a three-night stay at the Hilton Niseko over similar graded hotels on the southern Thai island of Ko Samui.

Prapharat, who started her trip in the ski resort on the northern island of Hokkaido and travels to Japan almost every year, paid 9,000 yen for a night’s board at the Hilton. She also dropped by a shop in Tokyo’s upmarket shopping and tourist district of Ginza during her visit and bought a Rolex Perpetual Datejust watch on a whim because it was the equivalent of 74,000 baht cheaper than in Thailand, a nation of 77 provinces.

She ran into her Thai friends three times in Tokyo which she said was “unbelievable.”

“Tokyo is like the 78th province of Thailand,” Prapharat said in an April 17 telephone interview in Bangkok. “I felt that the cost of eating and accommodation was so cheap during this trip.”

With assistance by Chris Cooper in Tokyo. Editors: Simon Harvey and Tony Jordan.

To contact the reporters on this story: Yumi Teso in Bangkok at [email protected]; Suttinee Yuvejwattana in Bangkok at [email protected]. To contact the editors responsible for this story: James Regan at [email protected]; Stephanie Phang at [email protected].


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Tags: economy, japan, thailand

Photo credit: Tourists take photos at a traditional temple in Kyoto, Japan. knehcsg / Flickr

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