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The is the official currency of
Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
. It is the third-most traded currency in the
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspec ...
, after the
United States dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...
(US$) and the
euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
. It is also widely used as a third
reserve currency A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves. The reserve currency can be used in international tran ...
after the US dollar and the euro. The New Currency Act of 1871 introduced Japan's modern currency system, with the yen defined as of gold, or of silver, and divided decimally into 100 ''sen'' or 1,000 ''rin''. The yen replaced the previous
Tokugawa coinage Tokugawa coinage was a unitary and independent metallic monetary system established by ''shōgun'' Tokugawa Ieyasu in 1601 in Japan, and which lasted throughout the Tokugawa period until its end in 1867. History The establishment of Tokugawa coi ...
as well as the various ''
hansatsu During the Edo period, feudal domains of Japan issued scrip called for use within the domain. This paper currency supplemented the coinage of the Tokugawa shogunate. Most scrip carried a face value in silver coinage, but gold and copper scrip ...
'' paper currencies issued by feudal ''han'' (fiefs). The
Bank of Japan The is the central bank of Japan.Louis Frédéric, Nussbaum, Louis Frédéric. (2005). "Nihon Ginkō" in The bank is often called for short. It has its headquarters in Chūō, Tokyo, Chūō, Tokyo. History Like most modern Japanese instituti ...
was founded in 1882 and given a monopoly on controlling the money supply. Following
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
, the yen lost much of its prewar value. To stabilize the Japanese economy, the
exchange rate In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
of the yen was fixed at ¥360 per US$ as part of the
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
. When that system was abandoned in 1971, the yen became undervalued and was allowed to float. The yen had appreciated to a peak of ¥271 per US$ in 1973, then underwent periods of depreciation and appreciation due to the
1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had supp ...
, arriving at a value of ¥227 per US$ by 1980. Since 1973, the
Japanese government The Government of Japan consists of legislative, executive and judiciary branches and is based on popular sovereignty. The Government runs under the framework established by the Constitution of Japan, adopted in 1947. It is a unitary state, c ...
has maintained a policy of currency intervention, so the yen is under a " dirty float" regime. The Japanese government focused on a competitive export market, and tried to ensure a low exchange rate for the yen through a
trade surplus The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
. The
Plaza Accord The Plaza Accord was a joint–agreement signed on September 22, 1985, at the Plaza Hotel in New York City, between France, West Germany, Japan, the United Kingdom, and the United States, to depreciate the U.S. dollar in relation to the French ...
of 1985 temporarily changed this situation; the exchange rate fell from its average of ¥239 per dollar in 1985 to ¥128 in 1988 and led to a peak rate of ¥80 against the US$ in 1995, effectively increasing the value of Japan’s GDP in dollar terms to almost that of the United States. Since that time, however, the world price of the yen has greatly decreased. The Bank of Japan maintains a policy of zero to near-zero interest rates and the Japanese government has previously had a strict anti-inflation policy.


Pronunciation and etymology

Yen derives from the Japanese word , which borrows its phonetic reading from
Chinese yuan The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 202 ...
, similar to
North Korean won The Korean People's won, sometimes known as the North Korean won (Symbol: ₩; Code: KPW; Korean: ) or Democratic People's Republic of Korea won (Korean: ), is the official currency of North Korea. It is subdivided into 100 ''chon''. The curre ...
and
South Korean won The Korean Republic won, unofficially the South Korean won ( Symbol: ₩; Code: KRW; Korean: 대한민국 원) is the official currency of South Korea. A single won is divided into 100 jeon, the monetary subunit. The jeon is no longer used f ...
. Originally, the Chinese had traded silver in mass called
sycee A sycee (;.. from Cantonese , , ). or yuanbao () was a type of gold and silver ingot currency used in imperial China from its founding under the Qin dynasty until the fall of the Qing in the 20th century. Sycee were not made by a central ban ...
s, and when Spanish and Mexican silver coins arrived from the
Philippines The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no), * bik, Republika kan Filipinas * ceb, Republika sa Pilipinas * cbk, República de Filipinas * hil, Republ ...
, the Chinese called them "silver rounds" () for their circular shapes., an article about the yen in ''
Heibonsha World Encyclopedia The is one of Japan's two major encyclopedias, the other being the ''Encyclopedia Nipponica''. The ''World Encyclopedia'' is widely held to be the most complete and up-to-date encyclopedia in the Japanese language. Formats The Heibonsha ''World ...
'', Kato Shuichi(ed.), Vol. 3, Tokyo: Heibonsha, 2007.
The coins and the name also appeared in Japan. While the Chinese eventually replaced with , the Japanese continued to use the same word, which was given the ''
shinjitai are the simplified forms of kanji used in Japan since the promulgation of the Tōyō Kanji List in 1946. Some of the new forms found in ''shinjitai'' are also found in Simplified Chinese characters, but ''shinjitai'' is generally not as extensiv ...
''form in reforms at the end of World War II. The spelling and pronunciation "yen" is standard in English because when Japan was first encountered by Europeans around the 16th century, Japanese () and () both had been pronounced and Portuguese missionaries had spelled them "ye". By the middle of the 18th century, and came to be pronounced as in modern Japanese, although some regions retain the pronunciation.
Walter Henry Medhurst Walter Henry Medhurst (29 April 179624 January 1857), was an English Congregationalist missionary to China, born in London and educated at St Paul's School. He was one of the early translators of the Bible into Chinese-language editions. Earl ...
, who had neither been to Japan nor met any Japanese people, having consulted mainly a Japanese-Dutch dictionary, spelled some "e"s as "ye" in his ''An English and Japanese, and Japanese and English Vocabulary'' (1830). In the early Meiji era,
James Curtis Hepburn James Curtis Hepburn (; March 13, 1815 – September 21, 1911) was an American physician, translator, educator, and lay Christian missionary. He is known for the Hepburn romanization system for transliteration of the Japanese language into the ...
, following Medhurst, spelled all "e"s as "ye" in his ''A Japanese and English dictionary'' (1867); in Japanese, ''e'' and ''i'' are slightly palatalized, somewhat as in Russian. That was the first full-scale Japanese-English/English-Japanese dictionary, which had a strong influence on Westerners in Japan and probably prompted the spelling "yen". Hepburn revised most "ye"s to "e" in the 3rd edition (1886) to mirror the contemporary pronunciation, except "yen". This was probably already fixed and has remained so ever since.


History


Introduction

Ōkuma Shigenobu Marquess was a Japanese statesman and a prominent member of the Meiji oligarchy. He served as Prime Minister of the Empire of Japan in 1898 and from 1914 to 1916. Ōkuma was also an early advocate of Western science and culture in Japan, and ...
was in charge of Japan's fiscal and foreign policy in the early Meiji period, and he worked with
Inoue Kaoru Marquess Inoue Kaoru (井上 馨, January 16, 1836 – September 1, 1915) was a Japanese politician and a prominent member of the Meiji oligarchy during the Meiji period of the Empire of Japan. As one of the senior statesmen (''Genrō'') in Jap ...
,
Itō Hirobumi was a Japanese politician and statesman who served as the first Prime Minister of Japan. He was also a leading member of the ''genrō'', a group of senior statesmen that dictated Japanese policy during the Meiji era. A London-educated samur ...
, and
Shibusawa Eiichi was a Japanese industrialist widely known today as the "father of Japanese capitalism". He spearheaded the introduction of Western capitalism to Japan after the Meiji Restoration. He introduced many economic reforms including use of double-en ...
to run the Ministry of Finance, seeking to introduce a modern monetary system into Japan. Ōkuma proposed that coins, which were previously square, be made into circles, and that the names of the traditional currencies,
ryō The was a gold currency unit in the shakkanhō system in pre- Meiji Japan. It was eventually replaced with a system based on the ''yen''. Origins The ''ryō'' was originally a unit of weight from China, the ''tael.'' It came into use in Japan ...
(両), bu (分) and shu (朱), be unified into yen (円), which was accepted by the government. On June 27, 1871, the
Meiji government The was the government that was formed by politicians of the Satsuma Domain and Chōshū Domain in the 1860s. The Meiji government was the early government of the Empire of Japan. Politicians of the Meiji government were known as the Meiji o ...
officially adopted the "yen" as Japan's modern unit of currency under the New Currency Act of 1871. While initially defined at par with the
Spanish Spanish might refer to: * Items from or related to Spain: **Spaniards are a nation and ethnic group indigenous to Spain **Spanish language, spoken in Spain and many Latin American countries **Spanish cuisine Other places * Spanish, Ontario, Cana ...
and Mexican dollars then circulating in the 19th century at 0.78
troy ounce Troy weight is a system of units of mass that originated in 15th-century England, and is primarily used in the precious metals industry. The troy weight units are the grain, the pennyweight (24 grains), the troy ounce (20 pennyweights), and the ...
(24.26 g) of fine silver, the yen was also defined as 1.5 grams of fine gold, considering recommendations to put the currency on the
bimetallic standard Bimetallism, also known as the bimetallic standard, is a monetary standard in which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange betwee ...
. The Act also stipulated the adoption of the decimal accounting system of ''yen'' (1, ), ' (, ), and ' (, ), with the coins being round and manufactured using Western machinery acquired from Hong Kong. The new currency was gradually introduced beginning from July of that year. The yen replaced the complex monetary system of the
Edo period The or is the period between 1603 and 1867 in the history of Japan, when Japan was under the rule of the Tokugawa shogunate and the country's 300 regional '' daimyo''. Emerging from the chaos of the Sengoku period, the Edo period was characteriz ...
in the form of
Tokugawa coinage Tokugawa coinage was a unitary and independent metallic monetary system established by ''shōgun'' Tokugawa Ieyasu in 1601 in Japan, and which lasted throughout the Tokugawa period until its end in 1867. History The establishment of Tokugawa coi ...
as well as the various ''
hansatsu During the Edo period, feudal domains of Japan issued scrip called for use within the domain. This paper currency supplemented the coinage of the Tokugawa shogunate. Most scrip carried a face value in silver coinage, but gold and copper scrip ...
'' paper currencies issued by Japan's feudal fiefs in an array of incompatible denominations. The former han (fiefs) became prefectures and their mints private chartered banks, which initially retained the right to print money. To bring an end to this situation, the Bank of Japan was founded in 1882 and given a monopoly on controlling the money supply. Following the silver devaluation of 1873, the yen devalued against the US and
Canadian dollar The Canadian dollar ( symbol: $; code: CAD; french: dollar canadien) is the currency of Canada. It is abbreviated with the dollar sign $, there is no standard disambiguating form, but the abbreviation Can$ is often suggested by notable style ...
s (since those two countries adhered to a gold standard), and by 1897, the yen was worth only about US$0.50. In that year, Japan adopted a gold exchange standard, defining the yen as 0.75 g fine gold or US$0.4985. This exchange rate remained in place until Japan left the gold standard in December 1931, after which the yen fell to $0.30 by July 1932 and to $0.20 by 1933. It remained steady at around $0.30 until the start of the Pacific War on December 7, 1941, at which time it fell to $0.23. The sen and the rin were eventually taken out of circulation at the end of 1953.


Fixed value of the yen to the U.S. dollar

No true exchange rate existed for the yen between December 7, 1941, and April 25, 1949; wartime inflation reduced the yen to a fraction of its prewar value. After a period of instability, on April 25, 1949, the U.S. occupation government
fixed Fixed may refer to: * ''Fixed'' (EP), EP by Nine Inch Nails * ''Fixed'', an upcoming 2D adult animated film directed by Genndy Tartakovsky * Fixed (typeface), a collection of monospace bitmap fonts that is distributed with the X Window System * ...
the value of the yen at ¥360 per US$ through a United States plan, which was part of the
Bretton Woods system The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement. The Bretto ...
, to stabilize prices in the
Japanese economy The economy of Japan is a highly developed social market economy, often referred to as an East Asian model. It is the third-largest in the world by nominal GDP and the fourth-largest by purchasing power parity (PPP). It is the world's secon ...
. That exchange rate was maintained until 1971, when the United States abandoned the gold standard, ending a key element of the Bretton Woods system, and setting in motion changes that eventually led to
floating exchange rate In macroeconomics and economic policy, a floating exchange rate (also known as a fluctuating or flexible exchange rate) is a type of exchange rate regime in which a currency's value is allowed to fluctuate in response to foreign exchange mar ...
s in 1973.


Yen and major currencies float

By 1971, the yen had become undervalued. Japanese exports were costing too little in international markets, and imports from abroad were costing the Japanese too much. This undervaluation was reflected in the current account balance, which had risen from the deficits of the early 1960s, to a then-large surplus of US$5.8 billion in 1971. The belief that the yen, and several other major currencies, were undervalued motivated the United States' actions in 1971. Following the United States' measures to devalue the dollar in the summer of 1971, the Japanese government agreed to a new, fixed exchange rate as part of the
Smithsonian agreement The Smithsonian Agreement, announced in December 1971, created a new dollar standard, whereby the currencies of a number of industrialized states were pegged to the US dollar. These currencies were allowed to fluctuate by 2.25% against the doll ...
, signed at the end of the year. This agreement set the exchange rate at ¥308 per US$. However, the new fixed rates of the Smithsonian agreement were difficult to maintain in the face of supply and demand pressures in the foreign-exchange market. In early 1973, the rates were abandoned, and the major nations of the world allowed their currencies to
float Float may refer to: Arts and entertainment Music Albums * ''Float'' (Aesop Rock album), 2000 * ''Float'' (Flogging Molly album), 2008 * ''Float'' (Styles P album), 2013 Songs * "Float" (Tim and the Glory Boys song), 2022 * "Float", by Bush ...
.


Yen adoption in Okinawa

After World War II the United States-administered Okinawa issued a higher-valued currency called the
B yen was a colloquial term used to refer to a form of military scrip used in post-war US-Occupied Okinawa from April 15, 1946, to September 1958."B yen." ''Okinawa konpakuto jiten'' (沖縄コンパクト事典, "Okinawa Compact Encyclopedia"). '' ...
from 1946 to 1958, which was then replaced by the
U.S. dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...
at the rate of $1 = 120 B yen. Upon the reversion of Okinawa to Japan in 1972 the Japanese yen then replaced the dollar. In light of the dollar's reduction in value from ¥360 to ¥308 just before the reversion, an unannounced "currency confirmation" took place on October 9, 1971, wherein residents disclosed their dollar holdings in cash and bank accounts; dollars held that day amounting to US$60 million were entitled for conversion in 1972 at a higher rate of ¥360.


Japanese government intervention in the currency market

In the 1970s, Japanese government and business people were very concerned that a rise in the value of the yen would hurt export growth by making Japanese products less competitive and would damage the industrial base. The government, therefore, continued to intervene heavily in foreign-exchange marketing (buying or selling dollars), even after the 1973 decision to allow the yen to float.Nanto, Dick K., ''Japan’s Currency Intervention: Policy Issues'', RL33178; Congressional Research Service, 2007 https://sgp.fas.org/crs/row/RL33178.pdf Despite intervention, market pressures caused the yen to continue climbing in value, peaking temporarily at an average of ¥271 per US$ in 1973, before the impact of the
1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had supp ...
was felt. The increased costs of imported
oil An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
caused the yen to depreciate to a range of ¥290 per US$ to ¥300 per US$ between 1974 and 1976. The re-emergence of trade surpluses drove the yen back up to ¥211 in 1978. This currency strengthening was again reversed by the second oil shock in 1979, with the yen dropping to ¥227 per US$ by 1980.


Yen in the early 1980s

During the first half of the 1980s, the yen failed to rise in value, though current account surpluses returned and grew quickly. From ¥221 per US$ in 1981, the average value of the yen actually dropped to ¥239 per US$ in 1985. The rise in the current account surplus generated stronger demand for yen in foreign-exchange markets, but this trade-related demand for yen was offset by other factors. A wide differential in interest rates, with United States interest rates much higher than those in Japan, and the continuing moves to
deregulate Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...
the international flow of
capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used f ...
, led to a large net outflow of capital from Japan. This capital flow increased the supply of yen in foreign-exchange markets, as Japanese investors changed their yen for other currencies (mainly dollars) to invest overseas. This kept the yen weak relative to the dollar and fostered the rapid rise in the Japanese trade surplus that took place in the 1980s.


Effect of the Plaza Accord

In 1985, a dramatic change began. Finance officials from major nations signed an agreement (the
Plaza Accord The Plaza Accord was a joint–agreement signed on September 22, 1985, at the Plaza Hotel in New York City, between France, West Germany, Japan, the United Kingdom, and the United States, to depreciate the U.S. dollar in relation to the French ...
) affirming that the dollar was overvalued (and, therefore, the yen undervalued). This agreement, and shifting supply and demand pressures in the markets, led to a rapid rise in the value of the yen. From its average of ¥239 per US$ in 1985, the yen rose to a peak of ¥128 in 1988, virtually doubling its value relative to the dollar. After declining somewhat in 1989 and 1990, it reached a new high of ¥123 to US$ in December 1992. In April 1995, the yen hit a peak of under 80 yen/US$, temporarily making Japan's economy nearly the size of that of the US.


Post-bubble years

The yen declined during the
Japanese asset price bubble The was an economic bubble in Japan from 1986 to 1991 in which real estate and stock market prices were greatly inflated. In early 1992, this price bubble burst and Japan's economy stagnated. The bubble was characterized by rapid acceleration ...
and continued to do so afterwards, reaching a low of ¥134 to US$ in February 2002. The Bank of Japan's policy of zero interest rates has discouraged yen investments, with the
carry trade The carry of an asset is the return obtained from holding it (if positive), or the cost of holding it (if negative) (see also Cost of carry). For instance, commodities are usually negative carry assets, as they incur storage costs or may suffer from ...
of investors borrowing yen and investing in better-paying currencies (thus further pushing down the yen) estimated to be as large as $1
trillion ''Trillion'' is a number with two distinct definitions: * 1,000,000,000,000, i.e. one million million, or (ten to the twelfth power), as defined on the short scale. This is now the meaning in both American and British English. * 1,000,000,000,0 ...
. In February 2007, ''
The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Econo ...
'' estimated that the yen was 15% undervalued against the dollar, and as much as 40% undervalued against the euro.


After the global economic crisis of 2008

However, this trend of depreciation reversed after the
global economic crisis of 2008 The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At t ...
. Other major currencies, except the
Swiss franc The Swiss franc is the currency and legal tender of Switzerland and Liechtenstein. It is also legal tender in the Italian exclave of Campione d'Italia which is surrounded by Swiss territory. The Swiss National Bank (SNB) issues banknotes and the f ...
, have been declining relative to the yen. On April 4, 2013, the Bank of Japan announced that they would expand their asset purchase program by $1.4 trillion in two years. The Bank of Japan hopes to bring Japan from deflation to inflation, aiming for 2% inflation. The number of purchases is so large that it is expected to double the money supply, but this move has sparked concerns that the authorities in Japan are deliberately devaluing the yen to boost exports. However, the commercial sector in Japan worried that the devaluation would trigger an increase in import prices, especially for energy and raw materials.


Redenomination proposals

Numerous proposals have been made since the 1990s to redenominate the yen by introducing a new unit or new yen, equal to 100 yen, and nearly worth one U.S. dollar. This has not happened to date, since the yen remains trusted globally despite its low unit value, and due to the huge costs of reissuing new currency and updating currency-reading hardware. The negative impact of postponing upgrades to various computer software until redenomination occurs, in particular, was also cited.


Coins

Coins were introduced in 1870, in silver 5, 10, 20 and 50 sen and 1 yen, and gold 2, 5, 10 and 20 yen. Gold 1 yen were introduced in 1871, followed by copper 1 rin, , 1 and 2 sen in 1873.
Cupronickel Cupronickel or copper-nickel (CuNi) is an alloy of copper that contains nickel and strengthening elements, such as iron and manganese. The copper content typically varies from 60 to 90 percent. (Monel is a nickel-copper alloy that contains a minimu ...
5 sen coins were introduced in 1889. In 1897, the silver 1 yen coin was demonetized and the sizes of the gold coins were reduced by 50%, with 5, 10 and 20 yen coins issued. After 1920, all previous series of silver coins were discontinued in favor of cupro-nickel 10 sen and reduced-size silver 50 sen coins. Production of silver 50 sen coins ceased in 1938, after which a variety of base metals were used to produce 1, 5 and 10 sen coins during the
Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
. Clay 5 and 10 sen coins were produced in 1945, but not issued for circulation. After the war, brass 50 sen, 1 and 5 yen were introduced between 1946 and 1948. The current-type holed brass 5 yen was introduced in 1949, the bronze 10 yen in 1951, and the aluminum 1 yen in 1955. Coins in denominations of less than 1 yen became invalid on December 31, 1953, following enforcement of the . In 1955 the first unholed, nickel 50 yen was introduced. In 1957, silver 100 yen pieces were introduced, followed by the holed 50 yen coin in 1959. These were replaced in 1967 by the current cupro-nickel 100 yen along with a smaller 50 yen. In 1982, the first cupronickel 500 yen coin was introduced. Alongside with the 5 Swiss franc coin, the 500 yen coin is one of the highest-valued coin to be used regularly in the world, with value of US$4.5 . Because of its high
face value The face value, sometimes called nominal value, is the value of a coin, bond, stamp or paper money as printed on the coin, stamp or bill itself by the issuing authority. The face value of coins, stamps, or bill is usually its legal value. Howe ...
, the 500 yen coin has been a favorite target for counterfeiters, resulting in the issuance in 2000 of the second nickel-brass 500 yen coin with added security features. Continued counterfeiting of the latter resulted in the issuance in 2021 of the third bi-metallic 500 yen coin with more improvements in security features. The observe side of all coins shows the coin's value in kanji as well as the country name (through 1945, ; after 1945, (except for the current 5-yen coin with the country name on the reverse). The reverse side of all coins shows the year of mintage, which is not shown in
Gregorian calendar The Gregorian calendar is the calendar used in most parts of the world. It was introduced in October 1582 by Pope Gregory XIII as a modification of, and replacement for, the Julian calendar. The principal change was to space leap years dif ...
years, but instead in the
regnal year A regnal year is a year of the reign of a sovereign, from the Latin ''regnum'' meaning kingdom, rule. Regnal years considered the date as an ordinal, not a cardinal number. For example, a monarch could have a first year of rule, a second year of ...
of the current emperor's reign. For reference: * Coins minted in 1900 bear the year 明治 (Meiji) 33, the 33rd year of
Emperor Meiji , also called or , was the 122nd emperor of Japan according to the traditional order of succession. Reigning from 13 February 1867 to his death, he was the first monarch of the Empire of Japan and presided over the Meiji era. He was the figur ...
's reign * Coins minted in 1920 bear the year 大正 (Taisho) 9, the 9th year of
Emperor Taisho An emperor (from la, imperator, via fro, empereor) is a monarch, and usually the sovereign ruler of an empire or another type of imperial realm. Empress, the female equivalent, may indicate an emperor's wife ( empress consort), mother ( e ...
's reign * Coins minted in 1980 bear the year 昭和 (Showa) 55, the 55th year of Emperor
Hirohito Emperor , commonly known in English-speaking countries by his personal name , was the 124th emperor of Japan, ruling from 25 December 1926 until his death in 1989. Hirohito and his wife, Empress Kōjun, had two sons and five daughters; he was ...
's reign * Coins minted in 2000 bear the year 平成 (Heisei) 12, the 12th year of Emperor
Akihito is a member of the Imperial House of Japan who reigned as the 125th emperor of Japan from 7 January 1989 until his abdication on 30 April 2019. He presided over the Heisei era, ''Heisei'' being an expression of achieving peace worldwide. Bo ...
's reign * Coins minted in 2020 bear the year 令和 (Reiwa) 2, the 2nd year of Emperor
Naruhito is the current Emperor of Japan. He acceded to the Chrysanthemum Throne on 1 May 2019, beginning the Reiwa era, following the abdication of his father, Akihito. He is the 126th monarch according to Japan's traditional order of succession. ...
's reign Due to the great differences in style, size, weight and the pattern present on the edge of the coin they are easy for people with visual impairments to tell apart from one another. Commemorative coins have been minted on various occasions in base metal, silver and gold. The first of these were silver ¥100 and ¥1,000 Summer Olympic coins issued for the 1964 games. The largest issuance by denomination and total face value were 10 million gold coins of ¥100,000 denomination for the 60th anniversary of reign of the
Shōwa Emperor Emperor , commonly known in English-speaking countries by his personal name , was the 124th emperor of Japan, ruling from 25 December 1926 until his death in 1989. Hirohito and his wife, Empress Kōjun, had two sons and five daughters; he was ...
in 1986, totalling ¥1 trillion and utilizing 200,000 kg fine gold. ¥500 commemorative coins have been regularly issued since 1985. In 2008 commemorative ¥500 and ¥1,000 coins were issued featuring Japan's 47 prefectures. Even though all commemorative coins can be spent like ordinary (non-commemorative) coins, they do not normally circulate, and ¥100,000 coins are treated with caution due to the discovery of counterfeits. The 1 yen coin is made out of 100% aluminum and can float on water if placed correctly.


Banknotes

The issuance of yen banknotes began in 1872, two years after the currency was introduced. Denominations have ranged from 1 yen to 10,000 yen; since 1984, the lowest-valued banknote is the 1,000 yen note. Before and during
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
, various bodies issued banknotes in yen, such as the
Ministry of Finance A ministry of finance is a part of the government in most countries that is responsible for matters related to the finance. Lists of current ministries of finance Named "Ministry" * Ministry of Finance (Afghanistan) * Ministry of Finance and Eco ...
and the Imperial Japanese National Bank. The Allied forces also issued some notes shortly after the war. Since then, the
Bank of Japan The is the central bank of Japan.Louis Frédéric, Nussbaum, Louis Frédéric. (2005). "Nihon Ginkō" in The bank is often called for short. It has its headquarters in Chūō, Tokyo, Chūō, Tokyo. History Like most modern Japanese instituti ...
has been the exclusive note issuing authority. The bank has issued five series after World War II. Japan is generally considered a cash-based society, with 38% of payments in Japan made by
cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-imm ...
in 2014. Possible explanations are that cash payments protect one's privacy, merchants do not have to wait for payment, and it does not carry any negative connotation like credit. At present, portraits of people from the
Meiji period The is an era of Japanese history that extended from October 23, 1868 to July 30, 1912. The Meiji era was the first half of the Empire of Japan, when the Japanese people moved from being an isolated feudal society at risk of colonization ...
and later are printed on Japanese bank notes. The reason for this is that from the viewpoint of preventing forgery, it is desirable to use a precise photograph as an original rather than a painting for a portrait.


Series E banknotes

Series E banknotes were introduced in 2004 in ¥1000, ¥5000, and ¥10,000 denominations. The
EURion constellation The EURion constellation (also known as Omron rings or doughnuts) is a pattern of symbols incorporated into a number of secure documents such as banknotes and ownership title certificates designs worldwide since about 1996. It is added to help ...
pattern is present in the designs.


Series F banknotes

On April 9, 2019, Finance Minister
Tarō Asō is a Japanese politician serving as the Vice President of the Liberal Democratic Party (LDP) since 2021. Asō previously served as Prime Minister of Japan from 2008 to 2009 and as Deputy Prime Minister of Japan and Minister of Finance from 2 ...
announced new designs for Series F banknotes ¥1000, ¥5000, and ¥10,000 notes, for use beginning in 2024. The ¥1000 bill will feature
Kitasato Shibasaburō Baron was a Japanese physician and bacteriologist. He is remembered as the co-discoverer of the infectious agent of bubonic plague in Hong Kong during an outbreak in 1894, almost simultaneously with Alexandre Yersin. Kitasato was nominated ...
and
The Great Wave off Kanagawa is a woodblock print by Japanese ''ukiyo-e'' artist Hokusai, created in late 1831 during the Edo period of Japanese history. The print depicts three boats moving through a storm-tossed sea, with a large wave forming a spiral in the centre an ...
, the ¥5000 bill will feature
Tsuda Umeko was a Japanese educator and a pioneer in education for women in Meiji period Japan.Nussbaum, Louis-Frédéric. (2005). "Tsuda Umeko" in . Originally named Tsuda Ume, with ''ume'' referring to the Japanese plum, she went by the name Ume Tsuda ...
and
Wisteria ''Wisteria'' is a genus of flowering plants in the legume family, Fabaceae (Leguminosae), that includes ten species of woody twining vines that are native to China, Japan, Korea, Vietnam, Southern Canada, the Eastern United States, and north o ...
flowers, and the ¥10,000 bill will feature
Shibusawa Eiichi was a Japanese industrialist widely known today as the "father of Japanese capitalism". He spearheaded the introduction of Western capitalism to Japan after the Meiji Restoration. He introduced many economic reforms including use of double-en ...
and
Tokyo Station Tokyo Station ( ja, 東京駅, ) is a railway station in Chiyoda, Tokyo, Japan. The original station is located in Chiyoda's Marunouchi business district near the Tokyo Imperial Palace, Imperial Palace grounds. The newer Eastern extension is ...
. The Ministry decided to not redesign the ¥2000 note due to low circulation.


Determinants of value

Beginning in December 1931, Japan gradually shifted from the gold standard system to the managed currency system. The relative value of the yen is determined in
foreign exchange market The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspec ...
s by the
economic forces Economic forces are the factors that help to determine the competitiveness of the environment in which the firm operates. These factors include: # Unemployment level # Inflation rate # Fiscal policies # Government changes These factors determine ...
of
supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...
. The
supply Supply may refer to: *The amount of a resource that is available **Supply (economics), the amount of a product which is available to customers **Materiel, the goods and equipment for a military unit to fulfill its mission *Supply, as in confidenc ...
of the yen in the
market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...
is governed by the desire of yen holders to exchange their yen for other currencies to purchase
goods In economics, goods are items that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods which are transferable, and services, which are not tran ...
,
services Service may refer to: Activities * Administrative service, a required part of the workload of university faculty * Civil service, the body of employees of a government * Community service, volunteer service for the benefit of a community or a pu ...
, or
asset In financial accountancy, financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value ...
s. The
demand In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...
for the yen is governed by the desire of foreigners to buy goods and services in Japan and by their interest in investing in Japan (buying yen-denominated real and financial assets). Since the 1990s, the Bank of Japan, the country's central bank, has kept interest rates low to spur economic growth. Short-term lending rates have responded to this monetary relaxation and fell from 3.7% to 1.3% between 1993 and 2008. Low interest rates combined with a ready liquidity for the yen prompted investors to borrow money in Japan and invest it in other countries (a practice known as
carry trade The carry of an asset is the return obtained from holding it (if positive), or the cost of holding it (if negative) (see also Cost of carry). For instance, commodities are usually negative carry assets, as they incur storage costs or may suffer from ...
). This has helped to keep the value of the yen low compared to other currencies.


International reserve currency

The
special drawing rights Special drawing rights (SDRs, code ) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). SDRs are units of account for the IMF, and not a currency ''per se''. They represent a claim ...
(SDR) valuation is an IMF basket of the world's major reserve currencies, including the Japanese yen. Its share of 8.33% as of 2016 has declined from 18% as of 2000.


Historical exchange rate

Before the war commenced, the yen traded on an average of 3.6 yen to the dollar. After the war the yen went as low as 600 yen per USD in 1947, as a result of currency overprinting in order to fund the war, and afterwards to fund the reconstruction. When MacArthur and the US forces entered Japan in 1945, they decreed an official conversion rate of 15 yen to the USD. Within 1945–1946: the rate tanked to 50 yen to the USD because of the ongoing inflation. During the first half of 1946, the rate fluctuated to 66 yen to the USD and eventually plummeting to 600 yen to the dollar by 1947 because of the failure of the economic remedies. Eventually, the peg was officially moved to 270 yen to the dollar in 1948 before being adjusted again from 1949 to 1971 to 360 yen to the dollar. Beginning in 2022 the Yen rate has become increasingly weaker with each passing month. The reasoning behind this is the US moving towards higher interest rates, while Japan remains "ultra-low". Other factors include the strength of the US economy and its labor market, while Japan continues to lag behind its peers to bring its economy back to its pre-pandemic size. Japan’s trade balance staying in the red is also likely feeding into the weaker yen. The table below shows the monthly average of the
U.S. dollar The United States dollar ( symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the officia ...
–yen
spot rate In finance, a spot contract, spot transaction, or simply spot, is a contract of buying or selling a commodity, security or currency for immediate settlement (payment and delivery) on the spot date, which is normally two business days after the ...
(JPY per USD) at 17:00 JST:


See also

*
Japan Mint The is an Independent Administrative Institution of the Japanese government, responsible for producing and circulating the coins of Japan. The agency has its head office in Osaka with branches in Saitama and Hiroshima. The Japan Mint does not pr ...
* Japanese military currency *
Economy of Japan The economy of Japan is a highly developed social market economy, often referred to as an East Asian model. It is the third-largest in the world by nominal GDP and the fourth-largest by purchasing power parity (PPP). It is the world's secon ...
* Capital flows in Japan * Monetary and fiscal policy of Japan * Balance of payments accounts of Japan (1960–90) *
List of countries by leading trade partners For most economies in the world, their leading export and import trading partner in terms of value is either the European Union or China, and to a certain degree, the United States and Russia. Other countries like Brazil, India, South Africa, Sou ...
*
List of the largest trading partners of Japan The 15 Largest Trading Partners of Japan These figures do not include services or foreign direct investment, but only trade in goods. The fifteen largest Japanese trading partners with their total trade (sum of imports and exports) in billions of ...
*
Korean Empire won The Korean won ( ko, 원 (圓), ) or Korean Empire won (Korean: 대한제국 원), was the official currency of the Korean Empire between 1902 and 1910. It was subdivided into 100 ''jeon'' (; ko, 전 (錢), ). Etymology Won is a c ...
(1902–1910)


Older currency

*
Japanese mon (currency) The was the currency of Japan from the Muromachi period in 1336 until the early Meiji period in 1870. It co-circulated with the new '' sen'' until 1891. The Kanji for ''mon'' is and the character for currency was widely used in the Chinese-ch ...
*
Koban (coin) The was a Japanese oval gold coin in Edo period feudal Japan, equal to one ''ryō'', another early Japanese monetary unit. It was a central part of Tokugawa coinage. The ''Keichō'' era ''koban'', a gold piece, contained about one ryō of gold ...
*
Ryō (Japanese coin) The was a gold currency unit in the shakkanhō system in pre- Meiji Japan. It was eventually replaced with a system based on the ''yen''. Origins The ''ryō'' was originally a unit of weight from China, the ''tael.'' It came into use in Japan ...
*
Wadōkaichin , also romanized as ''Wadō-kaichin'' or called ''Wadō-kaihō'', is the oldest official Japanese coinage, first mentioned for 29 August 708 on order of Empress Genmei. It was long considered to be the first type of coin produced in Japan. Ana ...


Notes


References


Citations


Sources

*


Further reading

* * *


External links


Japanese currency FAQ
i


Images of historic and modern Japanese bank notes


(Numista)

(in German)

(in German)

Estimates the historical value of the yen into other currencies {{DEFAULTSORT:Japanese Yen 1871 introductions Circulating currencies Currency symbols Japanese business terms Currencies of Japan Denominations (currency)