Japanese yen

2007 Schools Wikipedia Selection. Related subjects: Currency

Japanese yen
日本円 (Japanese)

¥10000 engraved by Edoardo Chiossone Circulated coins in all 6 denominations
ISO 4217 Code	JPY
User(s)	Japan
Inflation	-0.2%
Source	The World Factbook, 2005 est.
Subunit
1/100	sen
1/1000	rin
Symbol	¥
Plural	The language(s) of this currency does not have a morphological plural distinction.
Coins	¥1, ¥5, ¥10, ¥50, ¥100, ¥500
Banknotes
Freq. used	¥1000, ¥5000, ¥10000
Rarely used	¥2000
Central bank	Bank of Japan
Website	www.boj.or.jp
Printer	National Printing Bureau
Website	www.npb.go.jp
Mint	Japan Mint
Website	www.mint.go.jp

The yen or en ( Japanese: 円, en, in older Japanese yen) is the currency of Japan. It is also widely used as a reserve currency after the United States dollar and euro. The ISO 4217 codes for the yen are JPY and 392. The Latinised symbol is ¥, while in Japanese it is written with the kanji 円.

Etymology

The yen is a cognate of the Chinese yuan and the Korean won, and was originally written in the same way in Kanji as the Chinese yuan (圓 pinyin: yuán, Wade-Giles: yuen). Modern Japanese writings now use the simplified shinjitai character (円) which is different from the one commonly used (as shorthand) in Chinese (元). The Latinized symbol (¥) for the yen however, is identical to the one for the Chinese yuan, although the PRC also uses the single-crossbar Y (Ұ). Consequently, the ISO abbreviations JPY for the yen and CNY for the yuan are used to avoid confusion of the two currencies.

In standard Japanese, the yen is pronounced "en" but the spelling and pronunciation of "yen" is standard in English, due to a historical Portuguese transliteration. The inclusion of the letter y is based on romanization of an obsolete writing of the word, examples of which can also be found in such words as Yebisu, Iyeyasu, and Yedo. Like the spellings of names of people outside Japan, the romanization of yen has become a permanent feature.　En literally means "round object" in Japanese, as yuan does in Chinese, referring to the ancient Chinese coins that were circular in shape and widely used in Japan up to the Tokugawa Period.

History

The yen was introduced by the Meiji government in 1870 as a system resembling those in Europe. The yen replaced the complex monetary system of the Edo period, based on the mon. The New Currency Act of 1871 stipulated the adoption of the decimal accounting system of yen (1, 圓), sen (¹⁄₁₀₀, 錢), and rin (¹⁄₁₀₀₀, 厘), with the coins being round and cast as in the West. The yen was legally defined as 0.78 troy ounces (24.26 g) of pure silver, or 1.5 grams of pure gold. The same amount of silver is worth about 1181 today's yen, while the same amount of gold is worth about 3572 yen. The Act also moved Japan onto the gold standard. (The sen and the rin were eventually taken out of circulation in 1954.) While not a usage specific to currency, large quantities of yen are often counted in multiples of 10,000 (man, 万) in the same way as values in the United States are often quoted or rounded off to hundreds or thousands.

The yen lost most of its value during and after World War II; after a period of instability, the yen was pegged at 1 US dollar = ¥360 from April 25, 1949, to until 1971 when the Bretton Woods system collapsed and the value of the yen began to float. After the Plaza Accord of 1985, the yen appreciated against the dollar.

Coins

Currently Circulating Coins
Image	Value	Technical parameters				Description			Date of first minting
		Diameter	Thickness	Mass	Composition	Edge	Obverse	Reverse
	¥1	20 mm	1.2 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
	¥10	23.5 mm	1.5 mm	4.5 g	95% copper 3–4% zinc 1–2% tin	Smooth	Hōōdō Temple, Byōdō-in, state title, value	Evergreen tree, value, year of minting	1951
	¥50	21 mm	1.7 mm	4 g	Cupronickel 75% copper 25% nickel	Milled	Chrysanthemum, state title, value	Value, year of minting	1967
	¥100	22.6 mm	1.7 mm	4.8 g			Cherry blossoms, state title, value		1967
	¥500	26.5 mm	2 mm	7.2 g	Cupronickel 75% copper 25% nickel	Smooth with lettering ("NIPPON ◆ 500 ◆ NIPPON ◆ 500 ◆")	Paulownia, state title, value	Value, bamboo, Mandarin orange, year of minting	1982
	¥500			7 g	72% copper 20% zinc 8% nickel	Milled slantingly		Value, bamboo, Mandarin orange, year of minting, latent image	2000
These images are to scale at 2.5 pixels per millimeter, a standard for world coins. For table standards, see the coin specification table.

Japanese 10 yen coin ( obverse) showing Phoenix Hall of Byōdō-in

The 5-yen and 50-yen coins are holed. The date is on the reverse of all coins, and, in most cases, the name 日本国, Nihonkoku (Japan) and the value in kanji is on the obverse, except for the 5-yen where Nihonkoku is on the reverse.

The first 1-yen coin (excluding early silver coins) was a brass coin introduced in 1948, and discontinued in 1950, the first 5-yen coin (excluding early gold coins) in 1948, and originally had no hole. The first 10-yen was introduced in 1951, the first 50-yen in 1955 (with no hole), the first 100-yen in 1957 (originally made out of silver). The 500-yen coin was introduced in 1982.

500 yen coins are probably the highest valued coins to be used regularly in the world (with rates in the neighbourhood of US$4.77, €3.59, and £2.49). The United States' largest-valued commonly-used coin (25¢) is worth around 26 yen; the Eurozone's largest (€2) is worth ¥279, and the United Kingdom's largest (£2) is worth ¥402 (as of March 2005). The Swiss 5-franc coin is currently (as of May 2006) worth about ¥457. The highest valued bill, the 10,000 yen bill, is worth just a little bit less than the U.S. $100 bill, the highest denomination of currently circulating U.S. currency.

No doubt because of this high face value, the 500 yen has been a favorite target for counterfeiters. It was counterfeited to such an extent that in 2000, the existing 500 yen coins were withdrawn from circulation and a new series issued with various security features. Counterfeiting continues.

On various occasions, commemorative coins are minted using gold and silver with various face values, up to 100,000 yen. Even though they can be used, they are treated as collectibles.

Instead of displaying the A.D. year of mintage like most coins, yen coins instead display the year of the current emperor's reign. For example, a coin minted in 2006 would bear the date Heisei 18 (the 18th year of the Heisei Emperor's reign).

Determinants of value

Economic forces of supply and demand

The relative value of the yen is determined in foreign exchange markets by the economic forces of supply and demand. The supply of the yen in the market is governed by the desire of yen holders to exchange their yen for other currencies to purchase goods, services, or assets. The demand 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).

Fixed value of the yen to the dollar

In 1949 the value of the yen was fixed at ¥360 per US$1 through a United States plan, which was part of the Bretton Woods System, to stabilize prices in the Japanese economy. That exchange rate was maintained until 1971, when the United States abandoned the convertibility of the dollar to gold, which had been a key element of the Bretton Woods System, and imposed a 10 percent surcharge on imports, setting in motion changes that eventually led to floating exchange rates in 1973.

An undervalued yen

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 U.S. $5.8 billion in 1971. The belief that the yen, and several other major currencies, were undervalued motivated the United States' actions in 1971.

The yen and major currencies float

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, signed at the end of the year. This agreement set the exchange rate at ¥308 per US$1. 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.

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.

Despite intervention, market pressures caused the yen to continue climbing in value, peaking temporarily at an average of ¥271 per US$1 in 1973 before the impact of the 1973 oil crisis was felt. The increased costs of imported oil caused the yen to depreciate to a range of ¥290 to ¥300 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 by 1980.

The yen in the early 1980's

During the first half of the 1980s, the yen failed to rise in value even though current account surpluses returned and grew quickly. From ¥221 in 1981, the average value of the yen actually dropped to ¥239 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 the international flow of capital, 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.

The effect of the Plaza Accord

In 1985 a dramatic change began. Finance officials from major nations signed an agreement (the Plaza Accord) 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$1 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$1 in December 1992. In April 1995, the yen hit a peak of under 80 yen per dollar, temporarily making Japan's economy nearly the size of the US.

The yen's increased value made Japanese exports less price competitive and imports more price competitive, which should have brought down the value of trade and current account surpluses. The current account figures discussed earlier, however, indicated that such a response was slow. The strong appreciation of the yen began in 1985, but the current account continued to rise until 1987. Its decline in 1988 was rather small, although it experienced a more substantial decline in 1989.

Historical exchange rate

The table below shows the number of yen per U.S. dollar. (monthly average)