Japanese Yen - JPY (Jap. 円) is the monetary unit of Japan, one of the major reserve currencies of the world. It is divided into 100 sen and its international code is JPY. The symbol of the yen is ¥. It was used from 1869-1871 years in the form of silver and gold coins. Now you can find coins of 1, 5, 10, 50, 100, and 500 yen and banknotes of 1000, 2000, 5000, and 10 000 yen.
History of yen
The currency, written with the hieroglyph «円», comes from China and in Chinese it is called "yuan". In the Chinese Qing Empire one of the currencies was silver, which were in circulation in the form of ingots. However, in the 18th century, the Chinese began to import Spanish and Mexican silver coins, which were called "silver" (Chin. 银 円) or "Western Yuan" (Chin. 洋 円). Subsequently, in Hong Kong, the British began to produce local silver coins, Hong Kong dollars, which in Chinese were called "Hong Kong Yuan". The currency began to be present in Japan, where the "Yuan" sounded in Japanese way as "en". Since 1830, the Japanese launched the production of its own silver coins, similar to Hong Kong on the metal content and weight. This is how the first Japanese Yen appeared.
The position of yen in the world currencies
Japanese yen (JPY) in international trade transactions retains its status as one of the major currencies. The Japanese economy is counted among the world leaders, and remains one of the most developed. On top of that, Japan, in dollar terms, is among the largest exporters of products.
Bank of Japan is directly involved in maintaining the yen, which, on behalf of the State, is entrusted with the authority to reduce inflation and stimulate growth. Deflation remains a real threat to the stability of the Japanese economy for a long time. Ultimately, this situation has forced the Bank of Japan to opt for the policy of extremely low prices. In this way, the government hopes to foster economic growth and demand. This has resulted in slightly negative real interest rates in Japan in the 2000s.
The economic basis of Japanese yen
Traders, who use the yen in operations of their trading systems, should understand that the Japanese economy is specific. The first thing to remember is that the state, despite the size of Japan, has not enough economic growth. This is the situation after the national real estate market has experienced a real collapse. Japanese journalists, writers and media circles in this context like to mention the so-called "lost decade". At the same time, it should be noted that the real growth between 2001 and 2011 almost crossed the mark of 2%, and from time to time it dropped to zero and even to negative figures. In addition, the Japanese economy is characterized by the almost complete lack of inflation. The last 10 years, as mentioned above, there was only deflation.
The second difference which is specific to Japan is that it is one of the oldest and largest industrialized nations of the world, while having the most low fertility rates. This illustrates the general aging of the workforce and the number of employed people of young age decreasing from year to year. The state is closed to immigration, and this factor also influences the fertility rate.
The third characteristic of the "country of the Rising Sun" is about a developed economy with a well-educated workforce. Despite the fact that such sector of industry as shipbuilding went to China and South Korea, Japan retains its leading position in the production of electronics, household products, and automotive components technology. All this allows the country to significantly influence the processes in the global economy, and, at the same time, be highly dependent on China as a trading partner.
What changes yen?
Real exchange rates are determined by the market supply and demand, which, in turn, include many psychology factors of the market.
Among the economic factors you can name: the realization of GDP, retail sales and industrial production, trade balance and inflation. Such data are published regularly. This can be quite freely available from open sources: broker publications or Wall Street Journal and Bloomberg tabloids. Investors should be aware of the important macroeconomic indicators such as the employment data, interest rates (including the meetings of the central bank), and daily news (including natural disasters, elections and changes in government policy). This can have a significant influence on the exchange rate.
The unique characteristics of Japanese yen
When the real estate market crashed, the Bank of Japan not only kept prices low, but carried out the currency intervention (selling yen) for the Japanese exports remained competitive. Such interventions were also practiced in the past, but had political consequences. For this reason, the Bank of Japan intervenes in forex market quite reluctantly.
The yen remains in Asia as a currency sign, one of the most traded currencies in the world, a reserve currency and a huge weight for many countries of the Asian continent. The liquidity of the Chinese Yuan could bring down the priority of the yen, although this process is likely to take many years.
The yen has become a reserve currency for many countries due to its stable exchange rate. Despite Japan's public debt is very high, the traders are satisfied with the balance of the state debt, as most of the debt is concentrated in Japan itself. In addition, traders often compare Japan debt with its own high trade surplus. It comes from the fact that the trade balance of the country is under threat due to strengthening of the Japanese currency as the result of the status of the yen as a "refuge currency", and the devaluation of the US dollar. These factors make the yen attractive.