A dollar deposit started at ¥163 can avoid a principal loss even if the yen appreciates into the ¥156 range, with an annual interest rate of 5%. The dollar-yen rate has recently moved from the upper ¥160 range to the ¥158 range, and attention is focused on its outlook.
The dollar-yen rate recently reached the upper ¥163 range as the yen weakened, but briefly fell below ¥160 around 30 July 2026 amid moves believed to reflect foreign-exchange intervention, and was trading in the ¥158 range as of 7 August. The possibility of moves of several yen over a short period is an important consideration when evaluating foreign-currency deposits.
If you start a foreign-currency deposit at ¥163 and place $10,000 in a one-year US dollar time deposit paying 5% annual interest, the principal is ¥1.63 million and the after-tax interest is approximately $398, bringing the amount received after one year to $10,398. Recalculating this amount in yen, the exchange rate at which the original principal is preserved is approximately ¥156.75. If the yen appreciates to ¥156.75 or above, the exchange loss is offset by the interest, resulting in neither a gain nor a loss in practical terms.
Even when different starting exchange rates are used under the same conditions, the 5% interest shifts the break-even point toward a weaker yen, creating several yen of protection in each case.
In the ¥163 and 5% interest case, a profit-and-loss illustration for exchange rates ranging from ¥140 to ¥200 after one year shows that the interest offsets some of the loss even as the yen appreciates. For example, the loss at ¥140 is smaller than it would be before tax.