The national currency of Japan and is abbreviated as JPY
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The Japanese yen refers to the national currency of Japan and is abbreviated as JPY. The yen is the third most traded currency in the forex market after the US dollar and euro. It is also commonly used as a reserve currency like the USD, euro, and pound sterling.
Launched in 1871, 1 yen, 5 yen, 10 yen, 50 yen, 100 yen, and 500 yen coins are currently in use. With respect to banknotes, the latest series was issued in 2004, with 1,000 JPY, 2,000, 5,000 JPY, and 10,000 JPY notes that are presently in circulation.
The Japanese Yen refers to the national currency of Japan and is abbreviated as JPY.
The idea of the yen was part of the modernization policy of Japan’s economy formed by the Meiji government during the late 19th century.
The strengthening of the US dollar and the rising Japanese economy are often cited as reasons for the yen’s appreciation.
Origin and History of the Japanese Yen
The idea of the yen was part of the modernization policy of Japan’s economy formed by the Meiji government during the late 19th century, which asserted the adoption of a common currency throughout the world. It was designed based on the European Decimal Monetary System.
Before the Meiji Restoration, all the feudal fiefs of Japan issued their own currency, Hansatsu, in a collection of inconsistent denominations. They were removed by the New Currency Act of 1871, and the yen was introduced as the new acceptable decimal currency. Former Han was formed into districts, and the mints were transformed into private chartered banks. Initially, the banks retained the right to print currency until the creation of the Bank of Japan (BOJ) in 1882 with a monopoly on the control of the money supply.
Since World War II, the currency has lost much of its pre-war value. In order to balance the Japanese economy, the yen exchange rate was set at 360 yen per 1 USD as part of the Bretton Woods Agreement. When the scheme was scrapped in 1971, the value of JPY fell, and the currency was approved to float. The yen reached a high of 271 yen per US dollar in 1973, followed by a period of deflation and appreciation owing to the oil crisis of 1973, reaching a value of 227 yen per US dollar by 1980.
The Japanese Yen After the 2008 Economic Crisis
The Japanese government concentrated on competitive exports and aimed to keep a low exchange rate for JPY through excess trade. The 1985 Plaza Accord briefly altered the situation by increasing the exchange rate from its average of 239 yen per US dollar to 128 yen in three years, between 1985 and 1988. In 1995, it led to a high rate of 80 yen relative to the US dollar, essentially raising the size of Japan’s GDP in US dollars to almost similar to the United States. Since then, however, the yen’s market value has considerably decreased.
The Bank of Japan retains a zero or almost zero interest rate regime, with the Japanese government historically keeping a stringent anti-inflation policy. However, the wave of deflation reversed after the 2008 Global Financial Crisis.
In 2013, the Bank of Japan declared that it would extend its Asset Acquisition Policy by $1.4 trillion over two years. The BOJ seeks to bring the country from deflation to expansion, aiming at 2% inflation. Since the volume of sales is too high, the money supply was projected to double.
In 2018, CNBC stated JPY to be among the top-performing currencies of the year. In terms of power, it was projected to surpass the US dollar. Japan’s success in 2017 was due to liquidity from its central bank, government spending, and the worldwide demand for the country’s exports. The strengthening of the US dollar and the rising Japanese economy are often cited as reasons for the yen’s appreciation.
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