Japanese Yen (JPY)

Key takeaways

• JPY is the ISO code and ¥ is the symbol for the Japanese yen, Japan’s national currency.
• The yen is among the world’s most traded currencies and is commonly viewed as a safe-haven asset.
• Denominations range from 1‑yen coins to ¥10,000 banknotes; banknote designs have been updated to enhance security.
• Recent yen weakness has been driven mainly by divergent monetary policy between the Bank of Japan and other major central banks.

What is the yen?

The yen (JPY, ¥) is Japan’s official currency and a major global reserve and trading currency. It is heavily used in foreign-exchange markets and often plays a role in international portfolio allocation and carry trades.

Denominations

• Coins: 1, 5, 10, 50, 100, 500 yen.
• Banknotes: ¥1,000, ¥2,000, ¥5,000, ¥10,000.
  Banknote designs have been modernized to include advanced security features such as 3D holograms and portraits of notable historical figures.

Brief history

• Introduced in 1871 during the Meiji era to replace older coinage and regional scrip.
• The Bank of Japan (BoJ) was established in the 1880s and became the sole issuer of currency.
• The yen was pegged to the dollar after World War II and moved to a floating exchange-rate system in the 1970s.
• The Plaza Accord (1985) and later economic cycles, including long periods of deflation, have shaped modern policy and the yen’s value.
• To combat prolonged low inflation, the BoJ has pursued aggressive monetary easing and set a 2% inflation target.

Safe-haven status and carry trades

The yen is traditionally viewed as a safe haven and often appreciates during periods of global risk aversion. At the same time, persistently low domestic interest rates in Japan have supported carry trades—borrowing yen cheaply to invest in higher-yielding assets abroad. When global risk appetite reverses, carry-trade unwinding can push the yen higher.

Recent weakness and causes

Major factors behind recent yen depreciation:
* Monetary policy divergence: The BoJ has maintained very low or near-zero policy rates while other central banks raised rates to combat inflation, widening interest-rate differentials.
Yield-curve control and bond purchases: Large-scale BoJ purchases of government bonds to cap long-term rates have limited yen strength.
Inflation and import costs: A weaker yen raises the cost of imports, contributing to domestic price pressure and political scrutiny.

Trading and investing in yen

Options for exposure:
* Forex (spot and derivatives): High liquidity and leverage but carries significant risk; suitable for experienced traders.
Currency ETFs: Offer yen exposure (often via short-term yen-denominated assets) without leverage; still subject to currency risk.
Holding cash or bank deposits in yen: Practical for travelers or those with obligations in Japan.

Considerations:
* Forex markets can be highly leveraged and volatile.
Yen movements are influenced by global risk sentiment, interest-rate differentials, and BoJ policy.
Currency ETFs remove leverage but do not eliminate exchange-rate risk.

Converting yen to U.S. dollars

Formula: USD value = JPY amount ÷ (USD/JPY exchange rate)
Example: At USD/JPY = 133.25, ¥10,000 ≈ $75.05 (10,000 ÷ 133.25).

Where to buy yen

• Major bank branches and online banking services typically offer competitive rates.
• Currency exchange counters at airports and tourist locations are convenient but often have wider buy/sell spreads.
• ATMs in Japan accept many international debit and credit cards and can offer a cost-effective way to obtain yen once in-country (check fees and card compatibility before travel).

Summary

The Japanese yen is a globally important currency with a history shaped by Japan’s economic policy and international events. It functions both as a safe-haven asset and the funding currency for carry trades. Its value is sensitive to differences in monetary policy—especially actions by the Bank of Japan compared with other major central banks—and to shifts in global risk sentiment. When considering yen exposure, weigh the liquidity and convenience of different instruments against the currency risk and macroeconomic forces that drive JPY movements.