Saturday, 27 April 2013

120 yen

This used to be the rate for a dollar, and it was alarming to see the pound keep dipping the wrong side of it.
The first time I came to Japan, the pound was around 290 yen, and it fell to 230 in 9 months. The yen kept climbing into the 1990s. Then towards the end of the millenium the pound started going up and the economists talked about the Japanese economy stagnating. Of course the economy was still working away, money was circulating from consumers to producers to employees, and most people were employed by somebody and consuming something, so things probably weren't so bad. Roofs were over heads and food was on tables. Not only that but petrol was in cars, software was in game computers and champagne was on the shelves in supermarkets. It would be like looking at my height and weight and seeing no change in the past twenty years, declaring that I was stagnating, and lamenting that I wasn't three metres tall weighing 400 kilogrammes.
Anyway, the growth stopped by Summer 2007 when the pound was 250 yen. Then the wheels fell off the western economic bus. Perhaps "bus" is not a particularly appropriate metaphor for the western economy. It seems to have turned more into one of those sports cars that are great for the driver, but not very good for carrying other people.
This graph has nothing to do with temperatures, but you can definitely see some trends as different economies heat up and cool down. At one point it looks like one boiled over and spilt out of the pan and into the fire.

This all relates to our house since some of the financing came from savings in sterling. If I'd had a crystal ball and knew that I was going to be getting some land, that the western economy was in for a wobble, and that the yen was about to become a safe haven as the least-bad option for cash to flow into, I would have transfered a lump sum in the summer of 2007. As it was, and as usual, rather than doing it when I could have or should have, I left it until I had to.
If I'd had more sense, whether or not I'd had a crystal ball, I would have started transfering sterling in regular lumps as soon as we decided on the land. At the time the rate seemed so low and the pound so weak that I ought to borrow as much as possible in yen and save the sterling for later when the pound would surely be stronger. Of course it didn't get stronger. It got weaker.
Past performance is no guarantee of future growth. I was comparing the yen to my ideas of what it related to in sterling, but the two currencies were blissfully unaware of my opinions. A rate of 160 yen to the pound may have seemed very poor when I was buying the land, but it looked pretty good when the building bills started to come in and the pound was heading to 130. It still looks pretty good today when the pound has climbed a mountain and the rate is around 145.
With a currency pair, only one thing is certain. The rate will either get better, get worse or stay the same. There may be different probabilities for each outcome, but it will certanly be one of them. So the most sensible thing to do if you know you need to transfer money over the next couple of years is to start moving it, steadily.  The next question is how.