Editing Japanese yen (section)

==History==
{{split|History of the yen|date=July 2023}}
{{Further|Japanese currency}}

===Early history (1868–1876)===
[[File:5yen-M3.jpg|thumb|right|[[5 yen coin]] from 1870 (year 3)]]
[[File:50sen-M3.jpg|thumb|right|[[50 sen coin]] from 1870 (year 3)]]
Although the [[Tokugawa shogunate|Edo Shogunate]] collapsed with the [[Meiji Restoration]] and a new government was born, the monetary system still took over that of the former entity. During this unstable period, the confusion caused by this form of exchange caused economic turmoil.<ref>[[Japan Currency Museum]] (日本貨幣博物館) permanent exhibit, articles: [https://www.imes.boj.or.jp/cm/english/history/content/ The History of Japanese Currency], [https://www.imes.boj.or.jp/cm/english/FAQs/FAQcurrency/answer.html FAQs Japanese Currency] {{Webarchive|url=https://web.archive.org/web/20220807070240/https://www.imes.boj.or.jp/cm/english/FAQs/FAQcurrency/answer.html |date=August 7, 2022 }}</ref> The gold (counting money) system of eastern Japan and the silver (weighing money) system of the western Japan were not unified, and the difference in the gold-silver ratio caused a large amount of gold to flow overseas at the end of the Tokugawa shogunate. [[Emperor Meiji]] responded to this by appointing [[Ōkuma Shigenobu]] as head of Japan's monetary reform program. He worked with [[Inoue Kaoru]], [[Itō Hirobumi]], and [[Shibusawa Eiichi]] to run the Ministry of Finance, seeking to introduce a modern monetary system into Japan. Ōkuma eventually proposed that coins, which were previously square, be made into circles, and that the names of the traditional currencies, [[ryō]] (両), bu (分) and shu (朱), be unified into yen (円), which was accepted by the government.<ref>{{cite web|url=https://www.waseda.jp/inst/weekly/feature/2019/10/21/67340/|archive-url=https://web.archive.org/web/20221031042320/https://www.waseda.jp/inst/weekly/feature/2019/10/21/67340/|script-title=ja:日本の通貨はなぜ「円」なのか 大隈重信と新1万円札・渋沢栄一【前編】|language=ja|publisher=[[Waseda University]]|date=October 21, 2019|archive-date=October 31, 2022|access-date=October 31, 2022}}</ref> Other rejected proposals included physical [[Japanese units of measurement#Mass|weight units]] of "Fun" and "Momme" which never made it past the [[List of Japanese coinage patterns#Meiji|pattern stage]].<ref>{{cite web|archive-url=https://web.archive.org/web/20190820234637/https://www.ngccoin.com/price-guide/world/japan-fun-km-pn2-1869-cuid-1166640-duid-1451958|archive-date=August 20, 2019|url=https://www.ngccoin.com/price-guide/world/japan-fun-km-pn2-1869-cuid-1166640-duid-1451958|title=Japan Fun KM# Pn2 - (1869)|publisher=[[Numismatic Guaranty Corporation]]|access-date=August 20, 2019}}</ref><ref>{{cite web|archive-url=https://web.archive.org/web/20200119032108/https://www.pcgs.com/valueview/fun-1869-1958/nd-1869-p5-fun-km-pn3-bn/4829?sn=118130&h=pop|archive-date=January 19, 2020|url=https://www.pcgs.com/valueview/fun-1869-1958/nd-1869-p5-fun-km-pn3-bn/4829?sn=118130&h=pop|title=(nd(1869) P5 Fun KM-Pn3, BN) (Special Strike)Last Update|publisher=[[Professional Coin Grading Service]]|access-date=January 18, 2020}}</ref><ref>{{cite web|archive-url=https://web.archive.org/web/20200119031312/https://www.numisbids.com/n.php?p=lot&sid=2524&lot=150|archive-date=January 19, 2020|url=https://www.numisbids.com/n.php?p=lot&sid=2524&lot=150|title=Pattern Crossed flag&Mt. Fuji 1Momme Copper ND(1869?)|website=numisbids.com|access-date=August 21, 2019}}</ref>

The first gold yen coins consisted of 2, 5, and 20 yen coins which were struck throughout 1870. Five yen coins were first struck in gold for the Japanese government in 1870 at the [[San Francisco Mint]].<ref name="Frossard">{{cite book|url=https://books.google.com/books?id=R_R7KkL4VeUC&q=5+yen+coin+struck+1870|title=The Coin Collector's Journal|author=Edouard Frossard|publisher=Scott and Company|volume=3|year=1878|page=40}}</ref> During this time a new mint was being established at [[Osaka]], which did not receive the gold bullion needed for coinage until the following year.<ref>{{cite book|url=https://books.google.com/books?id=WInjJ3aId4UC&q=5+yen+coin+struck+1871&pg=PA368|title=Annual Report of the Director of the United States Mint|publisher=United States Mint|year=1895|page=368}}</ref> Gold bullion was delivered from private Japanese citizens, foreigners, and the Japanese government.<ref name="Hisamitsu">{{cite book|title=Monogatari Monogatari|author=Hisamitsu Shigehira|publisher=Mainichi Shimbun|year=1976|pages=176–178}}</ref> Initially the government opted for silver, which would become the standard unit of value leaving gold coinage as a subsidiary.<ref name="GS">{{cite book|url=https://books.google.com/books?id=Y8oxAQAAIAAJ&q=20+yen+1870&pg=PA13|title=Report of the Adoption of the Gold Standard in Japan|publisher=Government Press|year=1899|pages=2–8}}</ref> While gold coinage couldn't be produced domestically in 1870, the mint at Osaka could produce silver coins which included denominations of 5, 10, 20, and 50 sen.<ref>{{cite book|url=https://books.google.com/books?id=K49PDAAAQBAJ&dq=Japan+5+sen+coin+December+1870+osaka&pg=RA2-PA683|entry=Years-Estyate For Yen|title=Palgrave's Dictionary of Political Economy|author=John Eatwell|publisher=Springer|year=2016|page=683|isbn=978-1-349-10358-4}}</ref><ref>{{cite book|url=https://books.google.com/books?id=IVctAAAAIAAJ&dq=Japan+5+sen+coin+1870&pg=RA2-PA25|title=History - The First Period|series=Financial and Economic Annual of Japan|publisher=U.S. Government Printing Office|issue=7|year=1907|page=25}}</ref> None of these coins dated "1870" circulated until the [[Meiji (era)|Meiji government]] officially adopted the "yen" as Japan's modern unit of currency on June 27, 1871.<ref>A. Piatt Andrew, ''Quarterly Journal of Economics'', "The End of the Mexican Dollar", 18:3:321–356, 1904, p. 345</ref> This Act formally stipulated the adoption of the decimal accounting system of ''yen'' (1, {{nihongo2|圓}}), ''{{vanchor|sen}}'' ({{frac|100}}, {{nihongo2|錢}}), and ''{{vanchor|rin}}'' ({{frac|1000}}, {{nihongo2|厘}}). The new currency was gradually introduced beginning from July of that year.

Japanese yen denominated paper currency was also conceived with the coins in 1870 as [[Meiji Tsuho]] notes by Italian engraver [[Edoardo Chiossone]].<ref name="Chiossone">{{cite book|url=https://books.google.com/books?id=yfXIDwAAQBAJ&q=Dondorf+Naumann+Japan&pg=PA223|title=A bridge of Art and Culture Connecting Italy and Japan|series=Exchanges and Parallels between Italy and East Asia|author=Gaoheng Zhang, Mario Mignone|publisher=Cambridge Scholars Publishing|year=2019|page=223|isbn=978-1-5275-4462-8}}</ref> These were released as [[fiat currency]] in denominations of 1, 2, 5, 10, 50, and 100 yen along with subsidiary notes of 10, 20, and 50 sen in 1872. Almost concurrently, the government established a series of national banks modeled after the system in the [[United States]] which issued national bank notes.

===Satsuma Rebellion and aftermath (1877–1887)===
Massive inflation from the [[Satsuma Rebellion]] in 1877 caused a glut of non-redeemable fiat currency notes. The issuance of national fiat banknotes was ultimately suspended in 1880 by then prime minister [[Matsukata Masayoshi]].<ref name="SCP20">{{cite book|url=https://books.google.com/books?id=ywR7HXjTU9QC&q=was+stopped+on+1879%2C+&pg=RA1-PA29|title=The Gold Standard in Japan |publisher=Sound Currency Committee of the Reform Club|year=1899|page=20}}</ref><ref name="mono">{{cite book|url=https://books.google.com/books?id=J-wNAQAAMAAJ&dq=Satsuma+Rebellion+payment+December+1877&pg=PA31|title=Reserve Paper Money and Temporary Loan for the Redemption of Paper Money|series=Japanese Monographs|publisher=Oxford University Press|year=1922|issue=4|page=32}}</ref> New policies were put into place which included the establishment of a [[Central bank|centralized banking]] system.<ref name="BOJ History">{{cite web|url=https://www.boj.or.jp/about/outline/history/his_1850.htm/|title=A historical chronology of the Bank of Japan|publisher=[[Bank of Japan]]|language=Japanese|access-date=January 13, 2021}}</ref><ref name="mono"/> 
The [[Bank of Japan]] hence commenced operations on October 10, 1882, with the authority to print banknotes that could be exchanged for the old Government and National Bank Notes.<ref name="SCP29">{{cite book|url=https://books.google.com/books?id=ywR7HXjTU9QC&q=Count+Matsukata+became&pg=RA1-PA29|title=The Gold Standard in Japan|publisher=Sound Currency Committee of the Reform Club|year=1899|page=29}}</ref><ref name="BOJ1885">{{cite web|url=https://www.boj.or.jp/announcements/education/oshiete/history/j01.htm/|title=日本銀行創立の経緯について教えてください。|publisher=Bank of Japan|access-date=January 14, 2021}}</ref> By May 1883, another act provided the redemption and retirement of national bank notes.<ref name="NB1883AND1896">{{cite book|url=https://books.google.com/books?id=xM711UCVUGoC&dq=Japan+National+Bank+Note+1883&pg=PA19|title=Abolition of the National Banks |author=Herbert Max Bratter|publisher=U.S. Government Printing Office|year=1931|page=19}}</ref><ref name="Americana1">{{cite book|url=https://books.google.com/books?id=uMBGAQAAIAAJ&dq=Japan+National+Bank+Note+1883&pg=PA706|title=Japan - Finance and Coinage System in Japan|series=The Americana: A Universal Reference Library, Comprising the Arts and Sciences, Literature, History, Biography, Geography, Commerce, Etc., of the World. Biographies|publisher=Encyclopedia America Corporation|year=1923|volume=15|page=706}}</ref> The ''National Bank Act'' was amended again in March 1896, providing for the dissolution of the national banks on the expiration of their charters.<ref name="NB1883AND1896"/> This amendment also prohibited national bank notes from circulating after December 31, 1899.<ref name="expired">{{cite web|url=https://dl.ndl.go.jp/info:ndljp/pid/2947083/9|title=国立銀行紙幣の通用及引換期限に関する法律|publisher=[[Ministry of Finance (Japan)]]|access-date=December 27, 2020}}</ref> In that year, Japan adopted a [[gold exchange standard]], defining the yen as 0.75 g fine gold or US$0.4985.<ref>{{cite web|url=http://eh.net/encyclopedia/article/officer.gold.standard |title=EH.Net Encyclopedia: Gold Standard |access-date=July 9, 2012 |archive-url=https://web.archive.org/web/20051124102010/http://www.eh.net/encyclopedia/article/officer.gold.standard |archive-date=November 24, 2005 }}</ref>

This exchange rate remained in place until Japan left the gold standard in December 1931, after which the yen fell to $0.30 by July 1932 and to $0.20 by 1933.<ref>pp. 347–348, "Average Exchange Rate: Banking and the Money Market", ''Japan Year Book 1933'', Kenkyusha Press, Foreign Association of Japan, Tokyo</ref>

It remained steady at around $0.30 until the start of the Pacific War on December 7, 1941, at which time it fell to $0.23.<ref>pp. 332–333, "Exchange and Interest Rates", ''Japan Year Book 1938–1939'', Kenkyusha Press, Foreign Association of Japan, Tokyo</ref>

The sen and the rin were eventually taken out of circulation at the end of 1953.<ref>{{Nihongo|A law of the abolition of currencies in a small denomination and rounding off a fraction, July 15, 1953, Law No.60|[http://www.shugiin.go.jp/itdb_housei.nsf/html/houritsu/01619530715060.htm 小額通貨の整理及び支払金の端数計算に関する法律]|Shōgakutsūka no seiri oyobi shiharaikin no hasūkeisan ni kansuru hōritsu}})</ref>

===Fixed rate of the yen to the U.S. dollar===
No true exchange rate existed for the yen between December 7, 1941, and April 25, 1949; wartime inflation reduced the yen to a fraction of its prewar value.

After a period of instability, on April 25, 1949, the U.S. occupation government [[Fixed exchange rate|fixed]] the value of the yen at ¥360 per USD through a United States plan, which was part of the [[Bretton Woods system]], to stabilize prices in the [[Economy of Japan|Japanese economy]].<ref>p. 1179, "Japan – Money, Weights and Measures", ''The Statesman's Year-Book 1950'', Steinberg, S. H., Macmillan, New York</ref>

That exchange rate was maintained until 1971, when the United States abandoned the gold standard, ending a key element of the Bretton Woods system, and setting in motion changes that eventually led to [[floating exchange rate]]s in 1973.{{citation needed|date=May 2024}}<!-- true but still needs a citation -->

===Yen and major currencies float===
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 of payments)|current account balance]], which had risen from the [[Trade deficit|deficits]] of the early 1960s, to a then-large [[Trade surplus|surplus]] of US$5.8&nbsp;billion in 1971. The belief that the yen, and several other major currencies, were undervalued motivated the United States' actions in 1971.

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$. 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 [[Floating currency|float]].

===Yen adoption in Okinawa===
After World War II the [[United States Civil Administration of the Ryukyu Islands|United States-administered Okinawa]] issued a higher-valued currency called the [[B yen]] from 1946 to 1958, which was then replaced by the [[United States dollar|U.S. dollar]] at the rate of $1 = 120 B yen. Upon the [[1971 Okinawa Reversion Agreement|reversion of Okinawa]] to Japan in 1972 the Japanese yen then replaced the dollar. In light of the dollar's reduction in value from ¥360 to ¥308 just before the reversion, an unannounced "currency confirmation" took place on October 9, 1971, wherein residents disclosed their dollar holdings in cash and bank accounts; dollars held that day amounting to US$60 million were entitled for conversion in 1972 at a higher rate of ¥360.<ref>{{Cite news|newspaper=The Yomiuri Shimbun|date=2022-01-25|title=50 years on / Shift from dollar to yen triggered upheaval in Okinawa|url=https://japannews.yomiuri.co.jp/society/social-series/20220125-10712/|access-date=2023-02-20|language=en|archive-date=August 14, 2022|archive-url=https://web.archive.org/web/20220814191140/https://japannews.yomiuri.co.jp/society/social-series/20220125-10712/|url-status=live}}</ref>

===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.<ref name=":0">Nanto, Dick K., ''Japan's Currency Intervention: Policy Issues'', RL33178; Congressional Research Service, 2007

https://sgp.fas.org/crs/row/RL33178.pdf {{Webarchive|url=https://web.archive.org/web/20220804200813/http://sgp.fas.org/crs/row/RL33178.pdf |date=August 4, 2022 }}</ref>

Despite intervention, market pressures caused the yen to continue climbing in value, peaking temporarily at an average of ¥271 per US$ in 1973, before the impact of the [[1973 oil crisis]] was felt (this was retroactively called [[endaka]], although the term was only coined in 1985). The increased costs of imported [[Petroleum|oil]] caused the yen to depreciate to a range of ¥290 per US$ to ¥300 per US$ 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 [[1979 energy crisis|second oil shock in 1979]], with the yen dropping to ¥227 per US$ by 1980.<ref name=":0" />

===Yen in the early 1980s===
During the first half of the 1980s, the yen failed to rise in value, though current account surpluses returned and grew quickly. From ¥221 per US$ in 1981, the average value of the yen actually dropped to ¥239 per US$ 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 [[Deregulation|deregulate]] the international flow of [[Financial capital|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.

===Effect of the Plaza Accord===
{{Multiple image | direction = vertical
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|image1=JPY Nominal Effective Exchange Rates (1970-).svg
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|image2=JPY Real Effective Exchange Rates (1970-).svg
|caption2=JPY <span style="color:red;">nominal</span> and <span style="color:blue;">real</span> [[effective exchange rate]]s <small>(2005 = 100)</small>
}}
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$ 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$ in December 1992. In April 1995, the yen hit a peak of under 80 yen/US$, temporarily making Japan's economy nearly the size of that of the US.<ref>{{Cite web|last=Hongo|first=Jun|date=2011-09-13|title=Despite mounting debt, yen still a safe haven|url=https://www.japantimes.co.jp/news/2011/09/13/reference/despite-mounting-debt-yen-still-a-safe-haven/|access-date=2023-02-20|website=The Japan Times|language=en-US|archive-date=June 10, 2020|archive-url=https://web.archive.org/web/20200610034653/https://www.japantimes.co.jp/news/2011/09/13/reference/despite-mounting-debt-yen-still-a-safe-haven/|url-status=live}}</ref>

===Post-bubble years===
The yen declined during the [[Japanese asset price bubble]] and continued to do so afterwards, reaching a low of ¥134 to US$ in February 2002. The Bank of Japan's policy of zero interest rates has discouraged yen investments, with the [[carry trade]] of investors borrowing yen and investing in better-paying currencies (thus further pushing down the yen) estimated to be as large as $1 [[1000000000000 (number)|trillion]].<ref>{{cite news|url=https://www.economist.com/finance-and-economics/2007/02/01/what-keeps-bankers-awake-at-night |title=What keeps bankers awake at night? |date=February 1, 2007 |first=Satoshi |last=Kambayashi |location=London |newspaper=[[The Economist]] |url-access=registration |archive-url=https://web.archive.org/web/20070220005738/https://economist.com/finance/displaystory.cfm?story_id=8633485 |archive-date=February 20, 2007 |url-status=live}} (Note: archive contains original version of article in full)</ref> In February 2007, ''[[The Economist]]'' estimated that the yen was 15% undervalued against the dollar, and as much as 40% undervalued against the euro.<ref>{{cite news|url=https://www.economist.com/finance-and-economics/2007/02/08/carry-on-living-dangerously |title=Carry on living dangerously |date=February 8, 2007 |first=Satoshi |last=Kambayashi |location=London |newspaper=[[The Economist]] |url-access=registration |archive-url=https://web.archive.org/web/20070211175118/https://www.economist.com/finance/displaystory.cfm?story_id=8679006 |archive-date=February 11, 2007 |url-status=live}} (Note: archive contains original version of article in full)</ref>

===After the global economic crisis of 2008===
[[File:Currency gnp weighted comparison 1999 2011.svg|thumb|300px|left|Comparison of the GNP-weighted nominal exchange rates: CHF and JPY versus CNY, EUR, USD, and GBP]]
However, this trend of depreciation reversed after the [[Great Recession|global economic crisis of 2008]]. Other major currencies, except the [[Swiss franc]], have been declining relative to the yen.

On April 4, 2013, the Bank of Japan announced that they would expand their asset purchase program by $1.4&nbsp;trillion in two years. The Bank of Japan hopes to bring Japan from deflation to inflation, aiming for 2% inflation. The number of purchases is so large that it is expected to double the money supply, but this move has sparked concerns that the authorities in Japan are deliberately devaluing the yen to boost exports.<ref>{{cite news|url=https://www.theguardian.com/business/2013/apr/04/japan-quantitative-easing-70bn|newspaper=[[The Guardian]]|title=Japan aims to jump-start economy with $1.4tn of quantitative easing|date=April 4, 2013|access-date=May 23, 2013|archive-date=September 30, 2013|archive-url=https://web.archive.org/web/20130930145157/http://www.theguardian.com/business/2013/apr/04/japan-quantitative-easing-70bn|url-status=live}}</ref> However, the commercial sector in Japan worried that the devaluation would trigger an increase in import prices, especially for energy and raw materials.

===A period of rapid global inflation from 2022 onwards===
{{further|Carry trade}}
Since 2022, the yen has depreciated significantly against its peers, due to a variety of factors. Firstly, Japan's prolonged low-interest-rate policy (to tackle domestic [[deflation]]) has created a [[yield (finance)|yield]] differential with other countries{{mdash}}notably the US{{mdash}}that have high interest rates (to tackle domestic [[inflation]]), prompting investors to seek higher returns in foreign currencies. This interest rate differential directly affects the price <!-- not value, that is purchasing power --> of the Yen and serves as one of the drivers behind its depreciation. Widely held expectations of yen depreciation can become self-fulfilling prophecies, affecting the currency's exchange rate.<ref name="Economist 230430" /> To counter this, the BOJ conducted currency interventions of more than JPY 9 trillion selling the dollar and buying the yen in the September–October 2022 and April–May 2024 periods respectively.<ref>{{Cite web |title=外国為替平衡操作の実施状況(令和4年7月～令和4年9月) |url=https://www.mof.go.jp/policy/international_policy/reference/feio/data/quarter/2022_3Q.html |access-date=2024-06-01 |website=財務省 |language=ja}}</ref><ref>{{Cite web |title=外国為替平衡操作の実施状況(令和4年10月～令和4年12月) |url=https://www.mof.go.jp/policy/international_policy/reference/feio/data/quarter/2022_4Q.html |access-date=2024-06-01 |website=財務省 |language=ja}}</ref><ref>{{Cite web |title=外国為替平衡操作の実施状況(令和6年4月26日～令和6年5月29日) |url=https://www.mof.go.jp/policy/international_policy/reference/feio/data/monthly/20240531.html |access-date=2024-06-01 |website=財務省 |language=ja}}</ref>

===Redenomination proposals===
Numerous proposals have been made since the 1990s to [[Redenomination|redenominate]] the yen by introducing a new unit or new yen, equal to 100 yen, and nearly worth one U.S. dollar. This has not happened to date, since the yen remains trusted globally despite its low unit value, and due to the huge costs of reissuing new currency and updating currency-reading hardware. The negative impact of postponing upgrades to various computer software until redenomination occurs, in particular, was also cited.<ref>{{Cite web|url=https://www.thefreelibrary.com/Coalition+sets+up+talks+on+yen%27s+redenomination-a057825429|title=Coalition sets up talks on yen's redenomination. - Free Online Library|access-date=December 14, 2021|archive-date=December 14, 2021|archive-url=https://web.archive.org/web/20211214214921/https://www.thefreelibrary.com/Coalition+sets+up+talks+on+yen%27s+redenomination-a057825429|url-status=live}}</ref>