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The lead=yes is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar and the euro. It is also widely used as a third reserve currency after the US dollar and the euro.
The New Currency Act of 1871 introduced Japan's modern currency system, with the yen defined as of gold, or of silver, and divided decimally into 100 sen or 1,000 rin. The yen replaced the previous Tokugawa coinage as well as the various hansatsu paper currencies issued by feudal han (fiefs). The Bank of Japan was founded in 1882 and given a monopoly on controlling the money supply.
Following World War II, the yen lost much of its pre-war value as Japan faced a debt crisis and hyperinflation. Under the Bretton Woods system, the yen was pegged to the US dollar alongside other major currencies. After this system was abandoned in 1971 with the Nixon shock, the short-lived Smithsonian Agreement temporarily reinstated a fixed exchange rate. However, since the end of that system in February 1973, the yen has been a floating currency.
The Ministry of Finance and the Bank of Japan have sometimes intervened in the currency market in recent years, to try to slow down exchange rate movements. There were intermittent interventions from 1998 to 2003 and from 2010 to 2011 to curb excessive and speculative appreciation of the yen, and again in 2022 and 2024 to slow down speculative selling of the currency. The first two interventions were coordinated with respective countries, and the IMF has repeatedly stated that Japan is "committed to a flexible exchange rate".
The spelling and pronunciation "yen" is standard in English language, because when Japan was first encountered by Europeans around the 16th century, Japanese () and () were both pronounced . Accordingly, Portuguese missionaries spelled them as "ye". By the middle of the 18th century, and came to be pronounced as in modern Japanese, although some regions retain the pronunciation. Walter Henry Medhurst, who had neither been to Japan nor met any Japanese people, having consulted mainly a Japanese-Dutch dictionary, spelled some "e"s as "ye" in his An English and Japanese, and Japanese and English Vocabulary (1830). In the early Meiji era, the American physician and translator James Curtis Hepburn, following Medhurst, spelled all "e"s as "ye" in his A Japanese and English dictionary (1867); in Japanese, e and i are slightly palatalized, somewhat as in Russian. That was the first full-scale Japanese-English/English-Japanese dictionary, which had a strong influence on Westerners in Japan and probably prompted the spelling "yen", which appeared in the 2nd edition (1872). Hepburn revised most "ye"s to "e" in the 3rd edition (1886) to mirror the contemporary pronunciation, except "yen".
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. During this time a new mint was being established at Osaka, but this did not receive the gold bullion needed for coinage until the following year. Gold bullion was delivered from private Japanese citizens, foreigners, and the Japanese government. Initially the government opted for silver, which would become the standard unit of value, leaving gold coinage as a subsidiary. While gold coinage could not be produced domestically in 1870, the mint at Osaka could produce silver coins, and these included denominations of 5, 10, 20, and 50 sen. None of these coins dated "1870" circulated until the Meiji government officially adopted the "yen" as Japan's modern unit of currency on June 27, 1871.A. Piatt Andrew, Quarterly Journal of Economics, "The End of the Mexican Dollar", 18:3:321–356, 1904, p. 345 This Act formally stipulated the adoption of the decimal accounting system of yen (1, ), (, ), and (, ). 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.Gaoheng Zhang, Mario Mignone (2025). 9781527544628, Cambridge Scholars Publishing. . ISBN 9781527544628 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.
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.pp. 347–348, "Average Exchange Rate: Banking and the Money Market", Japan Year Book 1933, Kenkyusha Press, Foreign Association of Japan, Tokyo
It remained steady at around $0.30 until the start of the Pacific War on December 7, 1941, at which time it fell to $0.23.pp. 332–333, "Exchange and Interest Rates", Japan Year Book 1938–1939, Kenkyusha Press, Foreign Association of Japan, Tokyo
The sen and the rin were eventually taken out of circulation at the end of 1953.Shōgakutsūka no seiri oyobi shiharaikin no hasūkeisan ni kansuru hōritsu)
After a period of instability, on April 25, 1949, the U.S. occupation government fixed the value of the yen at ¥360 per USD through a United States plan, which was part of the Bretton Woods system, to stabilize prices in the Japanese economy.p. 1179, "Japan – Money, Weights and Measures", The Statesman's Year-Book 1950, Steinberg, S. H., Macmillan, New York
That exchange rate was maintained until 1971, when the United States abandoned the gold standard, ending a key element of the Bretton Woods system, and setting in motion changes that eventually led to floating exchange rates in 1973.
Following the United States' measures to devalue the dollar in the summer of 1971, the Japanese government agreed to a new, fixed exchange rate as part of the Smithsonian Agreement, signed at the end of the year. This agreement set the exchange rate at ¥308 per US$. 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 float.
https://sgp.fas.org/crs/row/RL33178.pdf
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 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 second oil shock in 1979, with the yen dropping to ¥227 per US$ by 1980.
On April 4, 2013, the Bank of Japan announced that they would expand their asset purchase program by $1.4 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. However, the commercial sector in Japan worried that the devaluation would trigger an increase in import prices, especially for energy and raw materials.
| ¥1 | 20 mm | 1.5 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 (rarely) | |
| 1959 | |||||||||
| ¥10 | 23.5 mm | 1.5 mm | 4.5 g | 95% copper 3–4% zinc 1–2% tin | reeding | Phoenix Hall, Byōdō-in, state title, value | Evergreen tree, value, year of minting | 1951 (rarely) | |
| Smooth | 1959 | ||||||||
| ¥50 | 21 mm | 1.7 mm | 4 g | Cupronickel 75% copper 25% nickel | reeding | Chrysanthemum, state title, value | Value, year of minting | 1967 | |
| ¥100 | 22.6 mm | 1.7 mm | 4.8 g | Cupronickel 75% copper 25% nickel | reeding | , state title, value | Value, year of minting | 1967 | |
| ¥500 | 26.5 mm | 1.81 mm | 7.1 g | Bi-metallic coin (75% copper 12.5% zinc 12.5% nickel) | reeding helically | Paulownia, state title, value | Bamboo, Mandarin orange, Value, year of minting | 2021 | |
The obverse side of all coins shows the coin's value in kanji characters as well as the country name (through 1945, ; after 1945, (except for the 5-yen coin with the country name on the reverse). The reverse side of all coins shows the year of mintage, which is not shown in Gregorian calendar years, but instead in the regnal year of the reigning emperor, with the first year of an era called . Imperial portraits have never appeared on Japanese coins, as the image of the emperor remains sacred. The regnal year does not necessarily align with the calendar year. The first coins of the Reiwa era were minted in July 2019.
In 1897, the silver 1 yen coin was demonetized and the sizes of the gold coins were reduced by 50%, with 5, 10 and 20 yen coins issued.
After the war, brass 50 sen, 1 and 5 yen were introduced between 1946 and 1948. The existing-type holed brass 5 yen was introduced in 1949, the bronze 10 yen in 1951, and the aluminum 1 yen in 1955.
In 1955 the first unholed, nickel 50 yen was introduced. In 1957, silver 100 yen pieces were introduced, followed by the holed 50 yen coin in 1959. These were replaced in 1967 by the existing cupro-nickel 100 yen along with a smaller 50 yen.
In 1982, the first cupronickel 500 yen coin was introduced. Alongside the 5 Swiss franc coin, the 500 yen coin is one of the highest-valued coin to be used regularly in the world, with a value of US$4.42 . Because of its high face value, the 500 yen coin has been a favorite target for counterfeiters, resulting in the issuance in 2000 of the second nickel-brass 500 yen coin with added security features. Continued counterfeiting of the latter resulted in the issuance in 2021 of the third bi-metallic coin 500 yen coin with more improvements in security features.
Due to the great differences in style, size, weight and the pattern present on the edge of the coin they are easy for people with visual impairments to tell apart from one another.
Commemorative coins have been minted on various occasions in base metal, silver and gold. The first of these were silver ¥100 and ¥1,000 Summer Olympic coins issued for the 1964 games. The largest issuance by denomination and total face value were 10 million gold coins of ¥100,000 denomination for the 60th anniversary of reign of the Shōwa Emperor in 1986, totalling ¥1 trillion and utilizing 200,000 kg fine gold. ¥500 commemorative coins have been regularly issued since 1985. In 2008 commemorative ¥500 and ¥1,000 coins were issued featuring Japan's 47 prefectures. Even though all commemorative coins can be spent like ordinary (non-commemorative) coins, they do not normally circulate, and ¥100,000 coins are treated with caution due to the discovery of counterfeits.
The 1 yen coin is made out of 100% aluminum and can float on water if placed correctly.
| ¥1000 | 150 × 76 mm | Blue | Kitasato Shibasaburō | The Great Wave off Kanagawa (from Thirty-six Views of Mount Fuji series by Hokusai) | 3 July 2024 | ||
| ¥5000 | 156 × 76 mm | Purple | Tsuda Umeko | Wisteria flowers | |||
| ¥10,000 | 160 × 76 mm | Brown | Shibusawa Eiichi | Tokyo Station (Marunouchi side) | |||
| ¥1000 | Mount Fuji, Lake Motosu and | 1 November 2004 | 2025 - 2027 | ||||
| ¥5000 | Kakitsubata-zu (Painting of irises, a work by Ogata Kōrin) | ||||||
| ¥10,000 | Statue of Fenghuang from Byōdō-in Temple | ||||||
| ¥2000 | 154 × 76 mm | Green | Shureimon | The Tale of Genji and portrait of Murasaki Shikibu | 19 July 2000 |
The issuance of yen banknotes began in 1872, two years after the currency was introduced. Denominations have ranged from 1 yen to 10,000 yen; since 1984, the lowest-valued banknote is the 1,000 yen note. Before and during World War II, various bodies issued banknotes in yen, such as the Ministry of Finance and the Imperial Japanese National Bank. The Allied forces also issued some notes shortly after the war. Since then, the Bank of Japan has been the exclusive note issuing authority. The bank has issued five series after World War II.
Japan is generally considered a cash-based society, with 38% of payments in Japan made by cash in 2014. Possible explanations are that cash payments protect one's privacy, merchants do not have to wait for payment, and it does not carry any negative connotation like credit.
At present, portraits of people from the Meiji era and later are printed on Japanese banknotes. The reason for this is that from the viewpoint of preventing forgery, it is desirable to use a precise photograph as an original rather than a painting for a portrait.
Series E banknotes were introduced in 2004 in ¥1000, ¥5000, and ¥10,000 denominations.
Series F banknotes were introduced on 3 July 2024. They were announced on 9 April 2019 by Finance Minister Tarō Asō. The ¥1000 bill features Kitasato Shibasaburō and The Great Wave off Kanagawa, the ¥5000 bill features Tsuda Umeko and Wisteria flowers, and the ¥10,000 bill features Shibusawa Eiichi and Tokyo Station. The Ministry decided to not redesign the ¥2000 note due to low circulation.
The EURion constellation pattern is present in the Series D, E and F banknotes.
The relative value of the yen is determined in foreign exchange markets by the Economics 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 . 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).
Since the 1990s, the Bank of Japan, the country's central bank, has kept interest rates low to spur economic growth. Short-term lending rates have responded to this monetary relaxation and fell from 3.7% to 1.3% between 1993 and 2008.Bank of Japan: "Statistics" . 2008. Low interest rates and low inflation, combined with a ready liquidity, prompted investors to borrow yen in Japan and invest it in other countries (such as the US) with significantly higher , a practice known as the carry trade. This has helped to keep the exchange rate of the yen low compared to other currencies, particularly the US dollar.
When MacArthur and the US forces entered Japan in 1945, they decreed an official conversion rate of 15 yen to the USD. Within 1945–1946: the rate tanked to 50 yen to the USD because of the ongoing inflation. During the first half of 1946, the rate fluctuated to 66 yen to the USD and eventually plummeting to 600 yen to the dollar by 1947 because of the failure of the economic remedies. Eventually, the peg was officially moved to 270 yen to the dollar in 1948 before being adjusted again from 1949 to 1971 to 360 yen to the dollar.
Beginning in 2022 the yen/dollar rate has become increasingly weaker with each passing month. By July 2024, the price fell to upper ¥161 per $1, marking the lowest exchange rate for the yen in 37.5 years on a nominal effective exchange rate and the lowest real effective exchange rate since the start of statistics by the Bank of Japan in 1970. One of the main reasons behind this fall was the US moving towards higher interest rates, while Japan remained "ultra-low". Other factors include the strength of the US economy and its labor market, while Japan continues to lag behind its peers to bring its economy back to its pre-pandemic size. Japan's trade balance staying in the red is also likely feeding into the weaker yen. Interviewed by The Asahi Shimbun in September 2022, Izuru Kato, chief economist at Totan Research, expressed concern about the sharp fall in its value since 2022. and Moneypost reported that the exchange rate instability had made it impossible to exchange the currency for Japanese yen at some exchange offices. With the rate returning to ¥150 in November 2023, concern deepened as Nikkei sources expected the yen to depreciate further in the future. The Economist (London) expressed concern over the performance of the Bank of Japan, suggested that a systemic risk is posed to the world financial system. Other reports of a weakening of the Japanese yen include the Noto Peninsula earthquake in January 2024, where previous earthquakes had seen a temporary appreciation of the yen against the US dollar, but this earthquake reversed the trend and weakened the yen against the US dollar. (OpEd) Goldman Sachs expects the Japanese yen to remain very weak in the coming months.
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