The Japanese Yen is the third most traded currency on the FX Market, behind the USD and the EUR.
Data obtained through the 2013 Triennial Central Bank Survey show that roughly 18% of all FX transactions carried out in 2013 was for the currency pair USD/JPY. This made the USD/JPY the second most traded currency pair for the year, only the EUR/USD was traded more (24%).
The currency pair GBP/JPY is nicknamed Guppy while the currency pair EUR/JPY is colloquially referred to as Yuppy.
The Japanese yen is sold freely on FX markets and its value fluctuates in relation to other major currencies. When the Japanese yen was introduced in 1871, it was tied to a gold standard. This gold standard has since been gradually abolished and the Japanese yen of today is fiat money.
The central bank for the Japanese yen is Nippon ginkō. Since 1997, Nippon ginkō has a very high degree of autonomy from the Japanese government.
Nippon ginkō has maintained low interest rates since the 1990s. In 2008, the short term interest rate were 1.3 percent. Despite maintaining very low interest rates, Nippon ginkō has repeatedly been criticized by the Japanese government for not doing enough to keep Japan out of deflation. During Shinzō Abe’s time as premier minister, the central bank has made very large bond purchases in an effort to put more yen into the system, and the bank has also made significant purchases of other financial instruments.
One factor that has helped keep the yen down in value in relation to other currencies is the curry trade. Investors borrow money in Japan where the interest rate is low, and invest them in another country. The global financial crisis of 2008 and onwards did however increase the yen’s value against most currencies (but not against the Swiss franc which was also strengthen by the crisis).
- In Japanese, yen is pronounced “en” rather than “yen” or “jen”.
- Yen means circle/round in Japanese. It is related to the Korean word won and the Chinese word yuan, which also means circle/round and are names for currency. This has to do with the history of circular coins in this region. Before traders arrived from Spain and Mexico with their round silver coins, round coins where not in use here. Silver was used to facilitate trade, but the silver could be of any shape. So, the imported coins where called yen / won / yuan due to their shape, and when Japan, Korea and China started minting their own round coins they used these names for them as well.
- The ISO-4217 currency code for the Japanese yen is JPY.
- The symbol ¥ is used for both the Japanese Yen and the Chinese yuan.
- The Japanese sign for yen is 円.
- 1 Japanese yen is equal to 100 sen. 1 sen is equal to 10 rin. There are only yen coins and bill in circulation, no sen or rin coins or bills, since they were withdrawn in the early 1950s.
- The JPY is the fourth most popular currency for currency reserves, behind USD, EUR and GBP.
- Together with the USD, EUR and GBP, the JPY makes up the currency basket used by the International Monetary Fund (IMF) to calculate the value of the IMF special drawing rights.