What is the Japanese yen and what is its role in the global financial system?

The Japanese yen (Japanese: 日本円; symbol: ¥; code: JPY) is the official currency of Japan. It holds significant international importance, being the third most traded currency in the foreign exchange market after the US dollar and the euro, and is also widely used as a reserve currency.

What is the ISO 4217 code and symbol for the Japanese yen?

The ISO 4217 code for the Japanese yen is JPY. The numeric code is 392. The commonly used symbol for the yen is ¥.

When was Japan's modern currency system introduced, and what was the initial definition of the yen?

Japan's modern currency system, with the yen as its unit, was introduced by the New Currency Act of 1871. Initially, the yen was defined as 1.5 grams of gold or 24.26 grams of silver, and it was divided decimally into 100 sen or 1,000 rin.

What did the yen replace when it was introduced as Japan's modern currency?

Upon its introduction in 1871, the yen replaced the previous Tokugawa coinage system and also superseded the various paper currencies, known as hansatsu, that were issued by the feudal domains (han).

What role did the Bank of Japan play in controlling the money supply?

The Bank of Japan was founded in 1882 and was granted a monopoly over the control of the money supply, establishing it as the central authority for monetary policy in Japan.

How did the Japanese yen's value change after World War II?

Following World War II, the yen experienced a period of instability, losing much of its pre-war value due to a debt crisis and hyperinflation. Under the Bretton Woods system, it was pegged to the US dollar, a fixed rate that was eventually abandoned in 1971.

What was the significance of the Nixon Shock for the Japanese yen?

The Nixon Shock in 1971 marked the abandonment of the Bretton Woods system's fixed exchange rates, which had pegged the yen to the US dollar. This event led to a period of transition, including the temporary reinstatement of a fixed rate via the Smithsonian Agreement, before the yen ultimately became a floating currency in February 1973.

What actions have the Ministry of Finance and the Bank of Japan taken regarding currency market interventions?

The Ministry of Finance and the Bank of Japan have intervened in the currency market intermittently from 1998 to 2003 and again from 2010 to 2011 to curb excessive appreciation of the yen. More recently, interventions occurred in 2022 and 2024 to counter speculative selling of the currency.

What is the etymological origin of the word 'yen'?

The name 'yen' originates from the Japanese word 'en' (圓), which means 'round'. This phonetic reading was borrowed from the Chinese 'yuan', a term used for silver coins, including Spanish and Mexican silver dollars that arrived from the Philippines, due to their circular shape.

Why is the spelling 'yen' used in English instead of 'en'?

The spelling 'yen' in English dates back to the 16th century when Europeans first encountered Japan. At that time, Japanese sounds similar to 'e' and 'we' were pronounced as 'ye' by Europeans, leading to the adoption of spellings like 'ye' and subsequently 'yen' in early dictionaries and texts.

What was the monetary situation in Japan during the early Meiji Restoration period (1868-1876)?

During the unstable period following the Meiji Restoration, Japan's monetary system had not yet been unified. Confusion arose from the co-existence of eastern Japan's gold (counting money) system and western Japan's silver (weighing money) system, and the differing gold-silver ratios caused significant gold outflow.

Who were the key figures involved in Japan's monetary reform during the Meiji era?

Emperor Meiji appointed Ōkuma Shigenobu to lead Japan's monetary reform program. Ōkuma worked closely with Inoue Kaoru, Itō Hirobumi, and Shibusawa Eiichi, who were all part of the Ministry of Finance, to establish a modern monetary system.

What were the initial denominations of Japanese coins minted in 1870?

In 1870, Japan began minting gold coins in denominations of 2, 5, and 20 yen. Simultaneously, the mint at Osaka produced silver coins in denominations of 5, 10, 20, and 50 sen.

When was the Bank of Japan established, and what was its primary role?

The Bank of Japan was established on October 10, 1882. Its primary role was to create a centralized banking system and it was granted the authority to print banknotes that could be exchanged for older government and national bank notes, effectively consolidating the nation's currency issuance.

How did the Satsuma Rebellion impact Japan's currency system?

The Satsuma Rebellion in 1877 led to massive inflation due to the issuance of a large quantity of non-redeemable fiat currency notes. This economic instability prompted reforms, including the suspension of national fiat banknote issuance and the establishment of a centralized banking system.

What was the value of the yen under the gold exchange standard adopted in 1897?

In 1897, Japan adopted a gold exchange standard, defining the yen's value at 0.75 grams of fine gold, which was equivalent to US$0.4985 at the time.

How did the Japanese yen's exchange rate change after the US abandoned the gold standard in 1971?

Following the US abandonment of the gold standard in 1971, the yen, along with other major currencies, experienced shifts that eventually led to the adoption of floating exchange rates in 1973. The Smithsonian Agreement briefly attempted to maintain a fixed rate of ¥308 per US dollar, but market pressures caused this to fail.

What was the 'currency confirmation' in Okinawa in 1971?

The 'currency confirmation' in Okinawa on October 9, 1971, was an unannounced measure taken before Okinawa's reversion to Japan. It allowed residents to disclose their dollar holdings, with those holding dollars on that specific day entitled to convert them at a preferential rate of ¥360 per US dollar when the yen officially replaced the dollar in 1972.

What was the 'endaka' phenomenon mentioned in relation to the yen's value?

'Endaka' refers to the appreciation of the yen against other currencies, particularly the US dollar. This phenomenon occurred notably after the Plaza Accord in 1985, causing the yen to double in value relative to the dollar and temporarily making Japan's economy nearly the size of the US economy.

What is the 'carry trade' in the context of the Japanese yen?

The carry trade involves investors borrowing yen, which has historically had very low interest rates, and then investing those funds in currencies of countries with higher interest rates, such as the US dollar. This practice increases the supply of yen in the market, contributing to its depreciation.

What are the denominations of currently circulating Japanese coins?

The currently circulating Japanese coins are denominated as ¥1, ¥5, ¥10, ¥50, ¥100, and ¥500.

What materials are used for the currently minted Japanese coins?

The 1 yen coin is made of 100% aluminum. The 5 yen and 10 yen coins are primarily copper alloys (brass for 5 yen, copper-zinc-tin for 10 yen). The 50 yen and 100 yen coins are made of cupronickel (75% copper, 25% nickel). The 500 yen coin is bi-metallic, composed of copper, zinc, and nickel.

What is depicted on the obverse and reverse sides of Japanese coins?

The obverse side of Japanese coins typically features the coin's value in kanji characters and the country's name ('Nippon-koku' after 1945). The reverse side displays the year of mintage, indicated by the Japanese era name and regnal year, along with other design elements like trees, flowers, or national symbols.

Why are imperial portraits never found on Japanese coins?

Imperial portraits are never depicted on Japanese coins because the image of the Emperor is considered sacred and is treated with reverence, thus remaining separate from everyday currency.

What were the 'sen' and 'rin' denominations, and why were they demonetized?

The 'sen' (one-hundredth of a yen) and 'rin' (one-thousandth of a yen) were subsidiary denominations. Coins in denominations less than 1 yen, including sen and rin, were officially demonetized at the end of 1953 due to inflation diminishing their monetary value.

What are the denominations of the currently issued Japanese banknotes?

The currently issued Japanese banknotes are in denominations of ¥1,000, ¥2,000, ¥5,000, and ¥10,000. The ¥2,000 note has low circulation and was not redesigned in the latest series.

Who are the figures featured on the latest Series F banknotes introduced in July 2024?

The Series F banknotes feature Kitasato Shibasaburō (¥1000), Umeko Tsuda (¥5000), and Shibusawa Eiichi (¥10000). The ¥1000 note also features Hokusai's 'The Great Wave off Kanagawa', the ¥5000 note features wisteria flowers, and the ¥10000 note features Tokyo Station.

What factors contribute to the determination of the yen's value in foreign exchange markets?

The yen's value is determined by economic forces of supply and demand in foreign exchange markets. Factors influencing this include the desire of yen holders to exchange it for other currencies to purchase goods, services, or assets, and the desire of foreigners to invest in Japan or purchase Japanese goods and services.

What is the significance of the 'most traded currencies' table?

The 'most traded currencies' table, based on daily foreign exchange market turnover, highlights the global prominence of currencies. It shows that the US dollar and Euro dominate trading volumes, with the Japanese yen ranking third, indicating its significant role in international finance.

How has the Japanese yen's share in the IMF's Special Drawing Rights (SDR) valuation changed over time?

The Japanese yen's share in the SDR valuation has decreased significantly. As of 2016, its share was 8.33%, a notable decline from its 18% share in 2000, reflecting shifts in global reserve currency composition.

What historical exchange rate was established for the yen against the US dollar after World War II?

Following World War II, the US occupation government established a fixed exchange rate of 360 yen per US dollar on April 25, 1949. This rate was maintained as part of the Bretton Woods system until 1971.

What does the 'real effective exchange rate' measure?

The real effective exchange rate measures a currency's value relative to a basket of other currencies, adjusted for inflation. A higher figure indicates a stronger yen, meaning it can purchase more goods and services relative to other currencies after accounting for price level differences.

What were the main reasons cited for the yen's significant depreciation starting in 2022?

The yen's depreciation since 2022 is attributed to several factors, primarily Japan's prolonged low-interest-rate policy contrasting with rising rates in other countries like the US to combat inflation. This yield differential encourages investors to seek higher returns elsewhere, weakening the yen. Additionally, the strength of the US economy and Japan's slower post-pandemic recovery contribute to this trend.

What is the historical context of the yen's exchange rate against the US dollar since 1950?

Since 1950, the yen's exchange rate against the US dollar has undergone significant fluctuations. It began at a fixed rate of 360 yen per dollar under the Bretton Woods system, then floated in 1973, experiencing periods of appreciation and depreciation influenced by economic policies, trade balances, and global events like oil crises.

What does the 'yellow' highlighting in the historical exchange rate table signify?

The yellow highlighting in the historical exchange rate table typically indicates a significant event or a notable peak/trough in the exchange rate for that particular month. For example, it highlights the yen's peak strength against the US dollar in March 1995.

Japanese Yen Wiki: The Yen Unveiled: A Deep Dive into Japan's Monetary Engine

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Overview

The Official Currency

The Japanese yen (円; symbol: ¥; code: JPY) is the official currency of Japan. It holds a significant position in the global financial landscape, being the third-most traded currency in the foreign exchange market, following the U.S. dollar and the euro.^[2] It also serves as a prominent reserve currency worldwide.^[2]

Economic Significance

Established by the New Currency Act of 1871, the yen's introduction unified Japan's monetary system, replacing older Tokugawa coinage and various feudal paper currencies. Its value was initially defined by both gold and silver standards, later transitioning to a floating currency after the collapse of the Bretton Woods system in 1973.^[4] The Bank of Japan, established in 1882, holds the authority to control the money supply.

Global Presence

The yen's international role is substantial. It is widely used in international trade and finance, and its exchange rate is closely monitored globally. The Bank of Japan and the Ministry of Finance have historically intervened in currency markets to manage its value, particularly during periods of rapid appreciation or depreciation.^[5]

Historical Evolution

Early Reforms (1868–1876)

Following the Meiji Restoration, Japan embarked on a significant monetary reform. The New Currency Act of 1871 established the yen as the national currency, defined by a decimal system (1 yen = 100 sen = 1000 rin). This move unified the disparate monetary systems previously in use and aimed to modernize the Japanese economy for international engagement.^[20]

Inflation and Centralization

The Satsuma Rebellion in 1877 led to significant inflation due to the issuance of non-redeemable currency. This crisis prompted fiscal reforms, including the establishment of the Bank of Japan in 1882, which was granted a monopoly on issuing banknotes. Japan adopted a gold exchange standard in 1897, defining the yen's value relative to gold.^[40]

Post-War and Floating Exchange Rate

After World War II, the yen experienced hyperinflation before being pegged to the U.S. dollar at ¥360 per USD under the Bretton Woods system in 1949. This fixed rate was maintained until 1971. Following the abandonment of the gold standard by the U.S. and the subsequent collapse of Bretton Woods, the yen began to float freely in 1973.^[4]

1971: Nixon Shock leads to the end of the Bretton Woods system.
1973: Yen begins to float freely against major currencies.
1985: Plaza Accord leads to a significant appreciation of the yen against the U.S. dollar.
Post-2008 Crisis: Yen strengthens due to global economic instability and carry trade dynamics.
2022 onwards: Yen depreciates significantly due to interest rate differentials and global inflation.

Coins of the Yen

Circulating Coinage

Japan currently mints six denominations of coins: ¥1, ¥5, ¥10, ¥50, ¥100, and ¥500. Each coin has distinct specifications regarding size, composition, and design, often featuring motifs from Japanese nature and culture.

Value	Diameter	Thickness	Mass	Composition	Edge	Obverse	Reverse	Date of first minting
¥1	20 mm	1.5 mm	1 g	100% aluminium	Smooth	Young tree, state title, value	Value, year of minting	1955
¥5	22 mm	1.5 mm	3.75 g	60–70% copper 30–40% zinc	Smooth	Ear of Rice, gear, water, value	State title, year of minting	1949 (rarely)^[55]
¥5	22 mm	1.5 mm	3.75 g	60–70% copper 30–40% zinc	Smooth	Ear of Rice, gear, water, value	State title, year of minting	1959
¥10	23.5 mm	1.5 mm	4.5 g	95% copper 3–4% zinc 1–2% tin	Reeded	Phoenix Hall, Byōdō-in, state title, value	Evergreen tree, value, year of minting	1951 (rarely)^[55]
¥10	23.5 mm	1.5 mm	4.5 g	95% copper 3–4% zinc 1–2% tin	Smooth	Phoenix Hall, Byōdō-in, state title, value	Evergreen tree, value, year of minting	1959
¥50	21 mm	1.7 mm	4 g	Cupronickel 75% copper 25% nickel	Reeded	Chrysanthemum, state title, value	Value, year of minting	1967^[c]
¥100	22.6 mm	1.7 mm	4.8 g	Cupronickel 75% copper 25% nickel	Reeded	Cherry blossoms, state title, value	Value, year of minting	1967^[d]
¥500	26.5 mm	1.81 mm	7.1 g	Bi-metallic (75% copper 12.5% zinc 12.5% nickel)	Reeded helically	Paulownia, state title, value	Bamboo, Mandarin orange, Value, year of minting	2021^[e]

The obverse side of Japanese coins typically features the coin's value in Kanji and the country's name. The reverse side displays the year of minting, indicated by the Japanese era name and year. Imperial portraits are not used due to the sacred nature of the Emperor.

Formerly Circulated

Coins in denominations of sen (1/100th of a yen) and rin (1/1000th of a yen) were historically used. These smaller denominations were demonetized at the end of 1953 due to inflation rendering them impractical for everyday transactions.^[41]

Banknotes of the Yen

Current Series

The Bank of Japan issues banknotes in denominations of ¥1,000, ¥5,000, and ¥10,000. The most recent series, Series F, was introduced in July 2024, featuring prominent figures and cultural motifs.

Value	Dimensions	Main Color	Obverse Portrait	Reverse Design	Date of Issue	Issue Suspended
Series F (Introduced July 3, 2024)
¥1,000	150 × 76 mm	Blue	Kitasato Shibasaburō	The Great Wave off Kanagawa (Hokusai)	July 3, 2024	2025 - 2027
¥5,000	156 × 76 mm	Purple	Tsuda Umeko	Wisteria flowers	July 3, 2024	2025 - 2027
¥10,000	160 × 76 mm	Brown	Shibusawa Eiichi	Tokyo Station (Marunouchi side)	July 3, 2024	2025 - 2027
Series E (Introduced November 1, 2004)
¥1,000	150 × 76 mm	Blue	Hideyo Noguchi	Mount Fuji, Lake Motosu and cherry blossoms	November 1, 2004	2025 - 2027
¥5,000	156 × 76 mm	Purple	Ichiyō Higuchi	Painting of irises (Ogata Kōrin)	November 1, 2004	2025 - 2027
¥10,000	160 × 76 mm	Brown	Fukuzawa Yukichi	Statue of hōō (phoenix) from Byōdō-in Temple	November 1, 2004	2025 - 2027
Series D (Introduced July 19, 2000)
¥2,000	154 × 76 mm	Green	Shureimon	The Tale of Genji and portrait of Murasaki Shikibu	July 19, 2000	N/A

Japan remains a cash-reliant society, with cash transactions accounting for a significant portion of payments, often attributed to privacy and convenience.^[66] Banknotes feature portraits of prominent figures from the Meiji period onwards, chosen for the detail achievable from photographs.

Determinants of Value

Market Forces

The yen's value is primarily determined by supply and demand in global foreign exchange markets. Factors influencing this include Japan's economic performance, trade balances, interest rate differentials, and investor sentiment. The Bank of Japan's monetary policies, such as quantitative easing and interest rate adjustments, play a crucial role in managing the yen's exchange rate.^[70]

Interest Rates and Carry Trade

For decades, Japan's low-interest-rate environment has encouraged the "carry trade," where investors borrow yen at low rates to invest in higher-yielding currencies. This practice has historically contributed to keeping the yen's value relatively low compared to other major currencies, although it can also lead to rapid yen appreciation if unwound.^[49]

Recent Trends

Since 2022, the yen has experienced significant depreciation against major currencies. This is largely attributed to widening interest rate differentials between Japan and countries like the U.S., which are raising rates to combat inflation. The Bank of Japan has intervened in currency markets to moderate these movements.^[50]

Global Reserve Currency

International Standing

The Japanese yen is recognized as a major international reserve currency. It is included in the basket of currencies used to determine the value of the International Monetary Fund's Special Drawing Rights (SDR). While its share in global reserves has fluctuated, it remains a significant component.^[73]

Reserve Composition

Data from central banks indicates the yen's proportion in global foreign exchange reserves. While the U.S. dollar and Euro dominate, the yen consistently ranks among the top currencies held by central banks worldwide, reflecting its stability and liquidity in international markets.

Most traded currencies by value
Currency distribution of global foreign exchange market turnover^[72]
Currency	ISO 4217 code	Proportion of daily volume April 2019	Proportion of daily volume April 2022	Change (2019–2022)
U.S. dollar	USD	88.3%	88.5%	0.2pp
Euro	EUR	32.3%	30.5%	1.8pp
Japanese yen	JPY	16.8%	16.7%	0.1pp
Pound sterling	GBP	12.8%	12.9%	0.1pp
Renminbi	CNY	4.3%	7.0%	2.7pp
Australian dollar	AUD	6.8%	6.4%	0.4pp
Canadian dollar	CAD	5.0%	6.2%	1.2pp
Swiss franc	CHF	4.9%	5.2%	0.3pp
Other	-	2.0%	2.4%	0.4pp

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References

With a diameter of 15.75 mm and a thickness of 0.3 mm, a one-rin coin is smaller than a modern euro cent (16.25 mm and 1.67 mm respectively).

A. Piatt Andrew, Quarterly Journal of Economics, "The End of the Mexican Dollar", 18:3:321â356, 1904, p. 345

pp. 347â348, "Average Exchange Rate: Banking and the Money Market", Japan Year Book 1933, Kenkyusha Press, Foreign Association of Japan, Tokyo

pp. 332â333, "Exchange and Interest Rates", Japan Year Book 1938â1939, Kenkyusha Press, Foreign Association of Japan, Tokyo

p. 1179, "Japan â Money, Weights and Measures", The Statesman's Year-Book 1950, Steinberg, S. H., Macmillan, New York

A full list of references for this article are available at the Japanese yen Wikipedia page

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This page was generated by an Artificial Intelligence and is intended for informational and educational purposes only. The content is based on a snapshot of publicly available data from Wikipedia and may not be entirely accurate, complete, or up-to-date.

This is not financial advice. The information provided on this website is not a substitute for professional financial consultation, investment advice, or tax guidance. Always consult with qualified financial professionals for your specific needs. Never disregard professional advice or delay in seeking it because of something you have read on this website.

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The Yen Unveiled

💡 Dive in with Flashcard Learning! 💡

Overview ℹ️

💴 The Official Currency

📈 Economic Significance

🌐 Global Presence

Historical Evolution 📜

🏛️ Early Reforms (1868–1876)

💸 Inflation and Centralization

🌍 Post-War and Floating Exchange Rate

Coins of the Yen 🪙

¥ Circulating Coinage

⏳ Formerly Circulated

Banknotes of the Yen 💵

💱 Current Series

Determinants of Value 📊

⚖️ Market Forces

📉 Interest Rates and Carry Trade

📈 Recent Trends

Global Reserve Currency 🌐

⭐ International Standing

📊 Reserve Composition

Teacher's Corner 🧑‍🏫

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References

📜 References

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Disclaimer ⚠️

📜 Important Notice

Dive in with Flashcard Learning!

Overview

The Official Currency

Economic Significance

Global Presence

Historical Evolution

Early Reforms (1868–1876)

Inflation and Centralization

Post-War and Floating Exchange Rate

Coins of the Yen

Circulating Coinage

Formerly Circulated

Banknotes of the Yen

Current Series

Determinants of Value

Market Forces

Interest Rates and Carry Trade

Recent Trends

Global Reserve Currency

International Standing

Reserve Composition

Teacher's Corner

True or False?

Test Your Knowledge!

Gamer's Corner

Discover other topics to study!

References

Feedback & Support

Disclaimer

Important Notice