The domestic economy of the Philippines is in a tough spot as the lockdown continues and the unemployment rate is said to be over 40%. Normally, one would not be surprised to see the Philippine peso getting cheaper, but in reality, the Philippine peso has hardly changed against the dollar or the yen since the beginning of the year.
The determinants of foreign exchange are not easy to explain because there are many factors that determine foreign exchange. For example, if you compare a country with a high real interest rate and a low real interest rate, you can generally sell the currency of the low country and buy the currency of the high country, and the difference in interest rates becomes a profit. At one point in time, developed countries had the cheapest interest rates in Japan and invested in the U.S. dollar, which resulted in the yen's strength against the dollar.
These days, the policy interest rates of major currencies (U.S. dollar, euro, pound, yen) are almost 0%. The real interest rate, which is the nominal interest rate minus the expected inflation rate, is about -1.0% in the United States and -0.1% in Japan. Considering the difference in interest rates alone, it would not be surprising to see the yen appreciate a bit more against the dollar.
The nominal interest rate in the Philippines is 2.75% and inflation is 2.5%, so the real interest rate is 0.25%. Therefore, it explains to some extent why the value of the Philippine peso has not fallen, but I believe there are more factors at play.
It's remittances from Filipinos working abroad. Last year, remittances amounted to $21.44 billion (¥2.229.76 trillion). If the population of the Philippines is roughly 110 million, it is calculated that each person receives 20,000 yen per year in remittances.
The largest volume of overseas remittances by Filipinos comes from the United States. That is, they sell U.S. dollars to buy Philippine pesos, which seems to indicate that the Philippine peso is stable against the dollar.
Aided by these remittances from overseas Filipinos, the Philippines' balance of payments for the current fiscal year will be in surplus of $8.1 billion, according to the Central Bank of the Philippines. With a balance of payments surplus, the Philippine peso is likely to stabilize for the time being, as there is no element of selling off of the Philippine peso.
The reason why I wrote about the exchange rate is because my pension will be the biggest income for my future life in the Philippines. When the Japan Pension Service sends money to pensioners abroad, it is supposed to be transferred to their bank accounts in the Philippines in dollars, which I will receive in the Philippines in exchange for Philippine pesos. In the Philippines, I would receive the dollars in Philippine pesos.
The higher the value of the yen, the more dollars will be received, and the more the exchange ratio between the dollar and the Philippine peso will affect the amount received. Therefore, I have no choice but to be sensitive to the exchange rate.
