- NAGA
- Currency Encyclopedia
- Japanese Yen
JPY - Japanese Yen
Importance of the Japanese Yen
The Japanese Yen (JPY) is the native currency of Japan and is the third-most traded currency in the world. It is considered to be a proxy for all trades done in Asia since China’s currency is still facing flexibility issues. Moreover, its importance lies in the fact that is the fourth most popular reserve currency following the US Dollar, Euro, and Sterling. One of the most important characteristics of the JPY is the zero interest rate which made the Japanese Yen one of the most popular funding currencies. Thus, a potential uncertainty in the markets or if it is an aggressive market crash can drive the JPY to higher levels. This is important since the JPY can show the market’s tolerance for risk.
Introduction of the Japanese Yen
In the 19th century, Japan started a new era by adopting a modernization policy. Part of this was also the establishment of a new currency known as the Yen. In 1871, the Meiji government decided to introduce a common unit of exchange which was designed based on the European Decimal Monetary System. In 1882, the Bank of Japan was created which had a monopoly on the control of the money supply. To maintain the Japanese economy after the Second World War, the currency lost a big part of its value. In the period 1985 until 1988, the JPY faced a tremendous change in its exchange rate from 249 yen per US dollar to 128 yen per USD, boosting Japan’s GDP. However, the Yen’s value started to decrease until 2018 when the CNBC estimated the JPY to be one of the top-performing currencies.
Freq Used: ¥1,000, ¥5,000, ¥10,000 Rarely Used: ¥2,000
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