JPY (Japanese Yen) Definition

What is the JPY (Japanese yen)?

JPY is the abbreviation for Japanese yen, the currency of Japan. The yen is often represented by a symbol that looks like the capital letter Y with two horizontal dashes in the center: ¥.

Key points to remember

  • The Japanese yen is the third most traded currency in the world, behind the US dollar and the euro.
  • The yen, usually a safe haven in times of market stress, fell to its lowest level in 24 years against the dollar in mid-2022.
  • The yen’s decline was fueled by the Bank of Japan’s (BoJ) refusal to follow other central banks in raising interest rates.
  • The BoJ has set an inflation target of 2% for Japan after decades of deflation damaging the economy.

Understanding JPY (Japanese Yen)

The Japanese yen is the third most traded currency in the Change market after the US dollar (USD) and the euro. The yen featured in exchanges accounting for 16.8% of foreign exchange turnover in a 2019 survey, compared to more than 88.3% for the dollar and 32.3% for the euro.

The yen also lags far behind the US dollar and the euro as the official currency. foreign exchange reservesreserves held in dollars exceeding those in yen more than 10 times in Q4 2021.

from Japan current account surplus arising from its role as a major net exporter limits the accumulation of yen by foreigners central banks.

JPY denominations

Coins with denominations of 1, 5, 10, 50, 100, and 500 yen are in circulation alongside ¥1,000, ¥2,000, ¥5,000, and ¥10,000 notes. The Japanese count sums in multiples of 10,000 yen rather than 1,000 as in the West with US dollars or euros.

Some denominations of Japanese yen banknotes are expected to be redesigned by 2024. The new 10,000 yen note will feature Eiichi Shibusawa, a 19th and early 20th century Japanese industrialist known as the “Father of Japanese Capitalism” . The 5,000 yen note will feature Umeko Tsuda, who founded Tsuda University in Tokyo, a pioneer in women’s education. The new 1,000 yen note will pay tribute to medical scientist Shibasaburo Kitasato. The new tickets will incorporate 3D holograms.

History of the Japanese Yen

The name yen is derived from “en”, the Japanese term for circle or round object which itself is derived from “yuan”, a Chinese term for imported silver coins. The Meiji government adopted the yen in 1871, replacing the metallic currency of the Tokugawa shogunate that preceded it as well as the patchwork of paper certificate issued by many feudal lords in the country.

The Bank of Japan (BoJ) was established in 1882 as central bank, and granted exclusive power to issue currency in 1884, producing its first yen note the following year. After a period of steady devaluation against the Canadian and US dollars, Japan followed the US and Canada in adopting the gold standard in 1897.

World War II destroyed the value of the yen, and post-war American occupation authorities imposed a complex web of regulated exchange rates while steadily depreciating the yen against the dollar amid rapid inflation. The value of the yen was pegged to the dollar in 1949 but left to float in 1973 following the collapse of the Bretton Woods system fixed exchange rates.

The 1985 Place Accord The agreement led to the controlled depreciation of the US dollar which more than doubled the value of the Japanese yen against the dollar in 1988, from ¥239 to ¥123 per dollar.

After decades of running deflationthe BoJ set an inflation target of 2% and pursued an aggressive strategy quantitative easing program.

Safe haven status of the JPY

The Japanese yen has long been considered a refuge. The currency often appreciates during periods of risk aversion in financial markets. Japan’s low domestic interest rates amid deflation have encouraged the country’s financial institutions and households to seek higher yields abroad, a trend known as transport trade. When these investment flows reverse during periods of market stress, the yen has tended to appreciate against the US dollar.

In mid-2022, however, the yen fell to a 24-year low against the US dollar, with the BoJ holding its policy rate close to zero while the Federal Reserve lifted the federal funds rate fight high inflation. Rising consumer prices aggravated by the falling yen had become a political issue in Japan ahead of the national elections.

133.25

The exchange rate of the Japanese yen against the US dollar as of August 4, 2022.

Trading the Japanese Yen

Unless you’re a savvy forex trader with a strong appetite for risk, it’s probably best not to get involved with the yen at all times, and especially during times when it’s under pressure. Nonetheless, brave pros and amateurs alike can trade the yen on the global forex market, which allows for significant leverage and tends to reward deep expertise in the issues driving yen trading.

In contrast, Yen ETFs offer no leverage, investing in yen-backed assets such as short-term debt and bonds. Although holding yen ETFs exposes you to potentially damaging risks risk of change.

How do I convert a value in Japanese yen to US dollars?

Divide the Japanese yen sum by the current exchange rate of the yen against the US dollar. As of August 4, 2022, the USD/JPY exchange rate was 133.25. ¥10,000 was worth about $75.04 (10,000 divided by 136.56) at this exchange rate.

Where is the best place to buy Japanese yen?

Some of the best places to buy Japanese yen are at a large branch of a national bank such as Chase, Bank of America, or Wells Fargo. You can also buy foreign currencies, including JPY, at airports, although exchange points are probably wider there. buy/sell spreads than the price of the convenient location.

What caused the decline of the Japanese yen?

Traders bet that the Bank of Japan would keep its key rate close to zero despite rising inflation. The BoJ had acquired more than half of outstanding Japanese government bonds in June 2022 in a bid to cap long-term interest rates to promote growth.