Cross-border living opens doors to new languages, cultures, and perspectives—and even currency adventures!

For those of us juggling the Japanese yen (JPY) and U.S. dollar (USD), exchange rates can be both a puzzle and a perk when managed wisely.

In this article, I’ll share insights from my own journey living between these currencies in Japan.

Disclaimer: I’m not a financial advisor. This is based on personal experience only. Please consult a qualified professional before making financial decisions.

This article covers:

U.S. Social Security in Japan
Navigating Payment Options Across Borders
Remittance: Sending Money Across Borders
My Personal Takeaways
FAQ
Wrap up

1. U.S. Social Security in Japan

When it’s time to claim U.S. Social Security while living in Japan, the U.S. Embassy can help you set it up. You generally have two options:

Option 1: Direct Deposit in JPY

Your benefit is converted at the exchange rate from the day before the deposit. If the yen is weak, you’ll receive more in JPY terms, which is why many retirees start checking FX rates regularly.

Since the conversion to yen has already taken place before the money reaches you, there is no separate FX gain to report. You simply declare the total JPY amount as miscellaneous income (雑所得).

This income is also subject to resident tax and can affect your national health insurance premiums if you are enrolled in Japan’s system.

🔹 Tip: Even if you are retired, enrollment in national health insurance is mandatory in Japan.

How to set up Social Security payments in Japan:
U.S. Embassy in Japan – Social Security Services

a. Contact the U.S. Embassy Social Security section. Staff will guide you through the required documents.

b. The Embassy will send you forms. You’ll need: your Japanese bank account details, Social Security number, residence card number, address, phone number, date of birth, and length of stay in Japan.

c. Visit your Japanese bank to register for Social Security deposits. The bank will generate a monthly report showing the USD amount, FX rate, and JPY deposit. Keep this for your tax return.

🔹Note: The FX rate is shown with six decimal places (e.g., 146.123456). Final deposit amounts are rounded: 5 and above round up, 4 and below round down.

Option 2: Receive in USD in the U.S., Then Transfer

You can also choose to have your Social Security deposited in USD to your U.S. bank account and then transfer it to Japan when needed.

To set this up, simply provide your U.S. bank account information on the application form. This option avoids automatic currency conversion but will involve a remittance fee charged by your bank or transfer service.

If you later exchange USD to JPY at a favorable rate, any FX gain is considered miscellaneous income in Japan and taxed at the progressive rate (unlike financial trading profits, which may be subject to a approx. 20% tax).

🔹 Tip: In Option 2, the Social Security benefit itself is taxed in the U.S. and is not taxed again as income in Japan. Only the foreign exchange (FX) gain from converting USD to JPY is reportable in Japan.

🔹 Tip: You can quickly check FX rates on Yahoo Finance or iPhone. For an official reference, I recommend the Bank of Japan’s daily exchange rate page:
👉 Bank of Japan – Foreign Exchange Rates (Daily)

2. Navigating Payment Options Across Borders

We maintain both U.S. credit cards (USD-based) and Japanese credit cards (JPY-based). The exchange rate often determines which card is more advantageous.

For example, if we use a U.S. card in Japan, purchases are billed in USD. Since we still hold investments in the U.S., dividends or capital gains can be used to cover that card balance.

This setup has two advantages: when the yen is weak, spending this way feels cheaper in JPY terms — and you avoid triggering taxable FX gains by not transferring the money into Japan.

This becomes even more relevant in retirement. Starting at age 73 (depending on your birth year), U.S. tax law requires mandatory withdrawals from retirement accounts such as 401(k)s. These are known as Required Minimum Distributions (RMDs).

By keeping those withdrawals in USD and using them directly (for example, to pay a U.S. credit card used in Japan), you can avoid extra FX conversions that would otherwise create taxable gains in Japan.

On the other hand, if you use a Japanese card abroad, your purchases are billed in JPY and then converted, which can end up costing much more depending on FX rates.

🔹 Note: Required Minimum Distributions (RMDs) are considered taxable income in the U.S., even if you live abroad.

For expats in Japan, this can create additional FX considerations, if withdrawals are converted into yen.

🔹 Note: Getting a Japanese credit card was challenging for my American husband. Even with a local bank account and balance, the application process is in Japanese, and the bank may call to confirm details. You’ll need to be ready to answer in Japanese.

Good news is that you can go to SMBC for Olive flexible pay (Credit card). We wish we had known it.

Other Payment Options

Apple Pay – Widely accepted in Japan (convenience stores, trains, etc.) and in the U.S. If linked to a U.S. card with no FX fees, it’s an excellent way to bypass currency conversion costs.
PayPay – Japan’s go-to QR code wallet. Great for everyday savings through cashback and point campaigns, but not designed for FX advantages.
Google Pay – Works well for cross-border travelers, though still less common in smaller Japanese shops compared to Apple Pay.
Cash – Still essential in Japan, especially for rural areas, local markets, and small clinics. Many places remain cash-heavy despite the growth of digital payments in Japan.

Practical Tips

Mix It Up – Use a U.S. card or Apple Pay for spending in Japan when the yen is weak. Use Japanese cards or PayPay for everyday JPY expenses.
Go Digital – Linking Apple Pay or Google Pay to the right card helps you avoid unnecessary FX conversions and makes payments seamless.
Watch FX Costs – Avoid PayPal for USD-to-JPY conversions (its spreads are expensive). It’s fine for USD-only payments, but for yen spending, stick with cards or bank transfers.
Carry Cash – Don’t forget: Japan still relies heavily on cash in certain areas, so always keep some yen on hand.

3. Remittance: Sending Money Across Borders

Transferring money between Japan, the U.S., or other countries takes some know-how—especially with exchange rates changing every day.

Types of Fees to Know

When sending money abroad, several types of fees may apply:

Transfer Fee:
A fee charged by the sending bank or remittance company for processing your international transfer.
Exchange Fee:
The cost of converting one currency to another.
Receiving Fee:
A fee charged by the receiving bank when the funds arrive in your account overseas.
Intermediary Bank Fee (Correspondent Fee):
When a transfer passes through an intermediary or “correspondent” bank, that bank may deduct its own fee from the total amount sent.
Lifting Charge:
A fee that can apply when sending funds abroad in the same currency without conversion—for example, sending USD directly from Japan to a U.S. account.

Recommended Services

Wise (formerly TransferWise)

Low, transparent fees
Fast transfer times
Wise site is in English

SBI Remit (for individuals)

Competitive fees
Quick transfer times
Supports more than 200 countries and regions
A leader in digital financial services in Japan

Traditional bank transfers are convenient since you can send directly from your account, but they tend to be more expensive due to intermediary bank fees and less favorable exchange rates.

🔹 Tip: Always check the total cost before sending—transfer fee, exchange rate margin, and any receiving fees. Sometimes a slightly lower exchange rate can cost more overall than a small flat fee with a better rate.

4. My Personal Takeaways

a. Dollar-Cost Averaging and FX Gains
For several years, I used dollar-cost averaging to buy U.S. dollars little by little while living in Japan. When the yen weakened, I converted some back to yen and made a profit.

Here’s the important part: foreign exchange gains are taxable as miscellaneous income (雑所得). Even after tax, I still came out ahead. But I learned that the real number to watch is your net gain after tax, not just the exchange rate difference.

Also remember: as your total taxable income increases, it can raise your resident tax and national health insurance premiums.

b. Investments Choices and PFIC

Living in Japan, I’ve noticed U.S. tax rules like PFIC (Passive Foreign Investment Company) can really narrow your investment picks. To dodge the hefty U.S. tax hit, I opted for Japanese individual stocks over mutual funds—a choice shaped by those rules.

On the Japanese side, tax-advantaged accounts like NISA offer a perk, helping cut taxes on certain investments with tax-free growth up to JPY1.8 million yearly in 2025.

🔹 NOTE: From my experience, keeping U.S. assets in the U.S. and Japanese ones here makes sense. Currency swings might bring FX gains, but they’re taxable, plus they tweak my resident tax　and health insurance premiums.

🔹 Note on PFIC: PFIC (Passive Foreign Investment Company) rules are U.S. tax regulations that penalize American taxpayers who invest in most non-U.S. mutual funds or investment trusts. The tax treatment can be both costly and complicated. Always check a fund’s domicile (U.S. vs. non-U.S.), because it’s the domicile—not the fund’s holdings—that determines PFIC exposure.

5. FAQ

Q1: How does FX impact health insurance premiums in Japan?
A1: National Health Insurance premiums are based on income, not a fixed rate. Employees who earn FX investment gains must include them in their tax return, and the total reported income will affect next year’s premiums. U.S. Social Security received in Japan is also taxable and reported as income, which can further raise premiums.

Q2: What’s the safest way to avoid surprises with cross-border income?
A2: Keep detailed records and make sure you understand how each type of income is taxed in Japan—whether it’s Social Security, FX gains, or investment income. Remember that taxes and social premiums (like resident tax and health insurance) go hand-in-hand.

Also, don’t forget your reporting obligations. U.S. taxpayers must report overseas assets to the IRS, and Japan requires disclosure to the local tax office. Japanese banks will also ask you to complete FATCA (Foreign Account Tax Compliance Act) forms if you are an U.S. person.

When in doubt, consult a tax professional familiar with both U.S. and Japanese systems to avoid costly mistakes.

Q3: How has the USD/JPY exchange rate changed over the past decade?
A: Over the past 10 years (2015–2025), the USD/JPY rate has swung, favoring USD strength.

It began around 118–120 JPY in 2015, dropped to 101–105 JPY in 2016, and soared to a 20-year high of 160–162 JPY in 2024 due to U.S. rate hikes—driven by the Fed raising rates to curb inflation—and JPY weakness from Japan’s loose monetary policy and low demand for safe-haven yen. Bank of Japan interventions since mid-2024 lowered it to around 147 JPY by October 4, 2025.

Check MUFG FX Chart for details. (Change the duration to 10 years)

Q4: Can I predict FX movements to plan my finances better?
A: Unfortunately, no. FX is influenced by many global factors—interest rate policies, economic shocks, investor sentiment—and it is extremely difficult to time correctly.

In our case, we make long-term household budgets in two ways: one using a conservative FX rate and another using the current rate, to stay prepared for both scenarios.

Q5: What’s the key takeaway from the last 10 years of FX history?
A: FX is a moving target. Instead of trying to predict every swing, focus on strategies that protect you in either direction: diversifying income sources, using both U.S. and Japanese financial tools, and planning with after-tax, after-premium effects in mind.

6.Wrap-Up

Living between currencies has taught me a few key lessons:

Always check your real net gain — don’t just look at exchange rates, calculate the after-tax result.
Understand how income is taxed in Japan — Social Security, FX gains, and investments are treated differently.
Use both U.S. and Japanese credit cards strategically — take advantage of FX conditions and avoid unnecessary fees.

Cross-border living is complex. On top of that, living abroad involves extra costs and paperwork: moving expenses, visa applications, residence card renewals, and more.

Still, with awareness and planning, living between currencies can bring not only challenges but also opportunities.

Living Between Currencies: What We’ve Learned About Social Security, Credit Cards, and FX in Japan