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 move her planned honeymoon from Italy to Japan.
Cherry trees blossom as pedestrians walk in front of buildings including the Tokyo Sky Tree, center, in Tokyo, Japan. (Bloomberg photo)
"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% 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 Organisation. The baht, Asia's best-performing currency in 2013, strengthened 14% versus the yen in the three months through March before rising a further 7.1% 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 its strongest against the yen in five years on April 22. Japan's currency may weaken to 100 per US dollar for the first time since 2009 by year-end, according to 54 analysts surveyed by Bloomberg.
Relatively Cheaper
Japan's currency has depreciated 18% 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%, compared with the Bank of Thailand's 2.75%.
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 18% 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."
Prasarn Trairatvorakul (Photo by Kitja Apichonrojarek)
Reversal Signal
Central bank chief 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 triggered the Asian financial crisis. The currency declined 0.1% to 28.86 per dollar as of 10.38am in Bangkok, while one baht was buying 3.45 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% 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 (THAI) Pcl, saw the percentage of seats filled on flights to Japan rise to 84.5% in the first quarter from 80.3% a year earlier, while the number of passengers climbed 25% to 508,164, according to the company’s executive vice president.
"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, the 45-year-old chief financial officer of Thai Solar Energy Co, the strengthening baht meant a 33% saving for a three-night stay at the Hilton Niseko over similar graded hotels on the southern island of Koh 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.
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."