(Bloomberg) -- If a trip to Japan's been on your bucket list forever, now might the time to plan on ticking it off, thanks to the weak yen giving foreign tourists a hefty boost to their spending power.
The fall in the currency hasn't gone unnoticed, with tourist numbers last month exceeding pre-Covid levels seen in October 2019, and the nation becoming the fastest-growing location for Millennial and Gen Z travelers in 2023, according to data from American Express. “Basically, your dollar is going to stretch 15% further than it did on January 1st this year,” said Scott Keyes founder of the airfare deals subscription service Going.
So how fast do you need to move and what can you do to lock in low prices? Here's all you need to know:
First off, why has the yen fallen so much?
Japan's central bank is keeping interest rates at rock-bottom levels — in fact they're negative — while the Federal Reserve and other central banks have been on a hiking cycle. That policy difference is driving the yen's weakness and making dollar-denominated assets more attractive for investors.
But that won't last forever. Economists see the end of negative rates likely coming in April 2024, with some analysts and market players expecting a move even earlier. That means the yen is more likely to strengthen in 2024 than weaken, given that the Fed is probably done with raising US rates. If that's the case, you may want to act fast.
How weak is the yen?
The Japanese currency rebounded from the cusp of a 33-year low against the dollar earlier this week, but the respite was limited. It then touched the weakest in 15 years against the euro, depreciated to a record level to the Swiss franc and registered a drop versus every other Group-of-10 currency.
Are flights to Japan getting cheaper?
They're cheaper than they were a year ago, but they're still likely to be more pricey than pre-pandemic. Given that airfares are probably the most expensive part of your holiday, that can take a toll, even when the weak yen is giving you a helping hand.
Following the pandemic, the frequency of flights between the US and Asia has been much slower to rebound than on routes such as America to Europe, which has kept prices relatively high. “A cheap flight to Japan today out of Los Angeles is around $600 return, while pre pandemic it would've been more like $450,” Going's Keyes said.
But good news could be around the corner. “Things are improving in a pretty significant way,” Keyes said. “For Japan specifically, the capacity for the first half of 2024 is scheduled to be just 5% lower than the first half of 2019.” As competition between the airlines increases, prices should fall, he said.
Should I book my Japan flights now, even if I'm not planning to visit until later in 2024?
Where tickets are concerned, it may make sense to hold off and wait for fares fall further. “I would say flights are getting cheaper. If you have flexibility about when you go, I think waiting is the best strategy,” Keyes said. The average price to Japan four or five months from now is going to be lower than it is today.”
What about spending money — exchange now or hold fire?
If you buy your yen before you travel, you're guaranteed the current exchange rate, but be mindful of commission and fees on foreign exchange services — as always, shop around for the best deal. And of course, there's the possibility the yen may fall further still.
Anthony Luxton, owner of Australian travel firm Japan Holidays, says there is some logic in buying yen now and stashing it away. “Who knows what the economies of these countries are going to be like in a couple weeks or month's time?” he said.
Brett Mitchell, managing director ANZ at Intrepid Travel, also advocates striking early. “To stretch your dollar, book and pay for your holiday in full now. Even if you're not planning on traveling for the next six months, convert and load your travel dollars now to make the most of the weak yen.”
Is cash still used in Japan?
Yes, it's still widely used throughout Japan, so you won't be left with fistfuls of bills. In fact some attractions, such as shrines, only accept cash. But credit and debit cards are now accepted in most shops and restaurants. As always, when traveling check fees for cash withdrawals on debit and credit cards before you go. And if ATMs ask which currency to charge you in, the local currency is usually the right choice.
Should I book tours and other attractions now to save money?
The cost of the holiday within Japan shouldn't change except during peak periods — the cherry blossom, ski and fall seasons — so there is no need to book attractions a long way in advance, said Luxton. One exception is rail travel. If you're planning on traveling by train, including the Shinkansen bullet trains and Narita Express, you can order your Japan Rail Pass six months before you travel. It's cheaper to buy it online than when you arrive in Japan.
And when's the best time to travel?
For a warm, dry climate the best times to travel are March to May and September to November. But for budget-conscious travelers who want the most bang for their buck, Intrepid's Mitchell says late May/early June and late November/early December can be more economical.
--With assistance from Paul Jackson.
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