JPY - Japanese Yen

The Japanese Yen is the official national currency and legal tender of Japan. The yen (symbol: ¥; currency code: JPY) is the third most traded currency in the world, behind the U.S. dollar and the euro, as well as the fourth most popular reserve currency, after the U.S. dollar, the euro and the pound sterling. During the Edo Period, Japan used a complex monetary system, characterized by the non-existence of fixed exchange rate between various coins in circulation. In order to simplify monetary transactions, the Meiji government issued the New Currency Act in 1871, which effectively made the yen the official currency of Japan, and marked Japan’s switch onto the Gold Standard. The word itself, “yen”, means “round”, or “round object”, due to the shape of the coin.

For a number of years, Japan used the Bretton Woods monetary system, which revolved around stable exchange rates. Using the system, the value of the yen was pegged at 360 yen for 1 U.S. dollar in 1949. However, the Bretton Woods system collapsed in 1971, which caused Japan to adopt a floating exchange rate system, which is still used today.

History of the Japanese Yen

During the 19th century, Spanish dollar coins were frequently used in monetary exchanges in Asia, especially in Southeastern Asia, the coast of China and Japan. Since Manila was one of the largest trader’s cities, these coins arrived on the galleons that docked to its shores, on its way from Acapulco, Mexico. At first, actual Spanish dollars were the only currency to be found, but, starting in 1840, they were gradually replaced by the silver dollars of the new Latin American Republics. Some of the local currencies were even modeled on the Mexican peso. Hong Kong was the first to introduce its own currency, the Honk Kong silver dollar coin, minted from 1866 to 1869, but the new currency was quickly abandoned due to China’s lack of willingness to accept it, and the decision to stick with the Mexican dollar, which they were familiar with. Subsequently, the minting machinery was sold. It was acquired by Japan.

Japan decided to replace the existing Tokunawa coinage, which was very complicated. The yen was introduced as the official currency following the New Currency Act of 1871. The yen was much easier to use for many reasons, the key one being the implementation of the decimal accounting. The yen could have been divided into 100 sen, or 1000 rin. Japan opted to use the bimetallic standard, but, due to devaluation of silver in 1873, the yen’s value dropped in comparison to the U.S and the Canadian dollar, because these two countries adopted the gold standard. Japan started adhering to the gold standard in 1897, freezing the value of the yen at $0.50. The Japanese yen lost most of its value during the World War II and the following years, especially when the U.S. introduced a fixed exchange rate of 360 yen for one U.S dollar.

Coins

After the yen was introduced in 1870, replacing the complicated Tokunawa system, new coins were also minted. Denominations of the silver 5, 10, 20 and 50 sen and 1 yen, as well as the gold 2, 5, 10, and 20 yen coins, were put into circulation, followed by the gold 1-yen coin one year later. Copper was used for the minting of 1-rin, ½, 1 and 2-sen coins. In later years, cupronickel was used to mint new coins with denominations of 5 and 10 sen. Silver was used for the production right up until 1938, when it was replaced by various basic metals and alloys.

After the introduction of the Small Currency Disposition and Fractional Rounding in Payments Act in 1953, denominations smaller than 1 yen were revoked. It paved the way for the release of the new, aluminum 1-yen coin in 1955, which is still used today, and the nickel 50-yen coin. In 1957, silver 100-yen coins were minted. They were in circulation until 1959, after which they were replaced by the equivalent cupronickel coins. The first nickel 500-yen coin was minted and put in circulation in 1982, and still remains the coin with the largest denomination. Because the coins vary significantly in design, size, weight, and the patterns on the edge of the coin, it makes them easier to tell apart from each other.

Banknotes

The first Japanese banknote was printed in 1872, two years after the first coins were minted and issued. So far, the smallest banknote denomination was that of 10 yen. The largest yen banknote is the bill for 10,000 yen. Today, the only institution that has the exclusive right to print yen banknotes is the Bank of Japan. In the years before and during the World War II, several different bodies were allowed to issue new bills, such the Ministry of Finance and the Imperial Japanese National Bank. During the U.S. occupation, the Allied forces also printed a certain number of bills.

There has been a total of five post-war series of notes. The E series, which is currently in use, consists of banknotes denominated in 1000, 2000, 5000 and 10,000 yen. The rarest among these is the 2000-yen note, which is no longer accepted as legal tender.