The History Of The Yen

Posted by Allison on 6 April 2009, 15:08

If you go onto any website that allows you to check out the exchange rates between countries, you will see that the Japanese yen is one of the world's major currencies, standing alongside such giants as the United States dollar, the British pound and the relatively new Euro.  The economy of Japan is also one of the world's strongest, which is part of the reason why the currency itself is a force to be reckoned with.

The yen itself was officially adopted as the currency of choice in Japan in 1871, so it has had a relatively long history compared to some world currencies – although when you compare it to such giants as the British pound (whose history of one kind or another stretches back several centuries) it is a mere baby.  The coin itself was brought into being during the Meiji Restoration period.

The word yen actually translates into the word 'circle' – an appropriate choice of name given the shape of the coin.  A couple of the modern day coins have also got holes in the centre of them – giving further support to the name yen.  This is a modern day 'nod' to the fact that coins in ancient times had holes in, although the reason for this to happen then was purely to make the coins easier to carry by stringing them together and hanging them around the neck.  Nowadays coins obviously aren't carried in this way, and the hole is there merely as a reminder of how things used to be more than anything else.

Before the Emperor Meiji ruled over Japan, the country used cash coins as a means of exchange.  Perhaps not surprisingly, cash coins gave birth to our modern day word of cash, to describe any money used in everyday life.  The history of cash coins stretches back way into the past, covering many centuries of use and having close ties with China in particular.  Many old cash coins have a hole in the middle, much the same as some modern day yen coins do, although the hole in ancient cash coins tended to be of the square variety.

Cash coins may have served a purpose in Japan, but their use was somewhat uneven, since there wasn't a firm exchange rate of any type in effect at that time.  Cash coins came in from China and the Japanese liked them enough to start making their own.  But as long as Japan didn't have a proper currency that it could call its own, there was essentially a limit to what it could do and how much it could develop as a country.

That's why the yen was introduced by Emperor Meiji during his time as ruler over the country, and from 1871 onwards Japan began its path towards becoming the strong and powerful country that it is today.  The yen was introduced immediately as a decimal currency, making it easy to relate to and understand, and the days of the cash coins and no fixed exchange rate were over.  Given the fact that the yen is now traded frequently on the foreign exchange, it seems that its introduction and use has been a resounding success.

However things weren't always so rosy.  The Second World War crippled the currency greatly, and it was that same war which saw the introduction of the Japanese military yen as well.  This was created purely to be brought into circulation in those countries which the Japanese took over during the length of the war.  For all intents and purposes the currency was much the same as the standard yen, with only a few differences.  The currency was also given to the soldiers fighting the war, and anyone living in a country or region that the soldiers overcame was told to use it instead of their own currency.  The Japanese military yen had a natural life span however, and once the war was over it became an obsolete currency.  Although this was good for the people who had to use it, the fact that the currency was now worth nothing meant that many people were left out of pocket.

The yen itself has had a rollercoaster history in recent years.  At present a single US dollar is roughly equal to 102 Japanese yen (although this does of course fluctuate greatly over time), but the figures varied enormously several decades ago.  In the mid 1970s your single dollar would have bought you something in the region of 300 Japanese yen – wonderful for Americans visiting the country but disastrous for the Japanese economy.  The 1980s saw many more fluctuations before it eventually settled down into the kind of exchange rates we see more commonly today.

The Japanese yen is shrouded in mystery compared to many other currencies, for which there are many sources of information.  One thing remains clear however – the Japanese yen of today underpins the strong economy and advanced way of living that is typical of modern day Japan.  One wonders what Emperor Meiji would think now of the currency he introduced during his reign well over a hundred years ago, and more interestingly, what would have happened if the yen had never come into being at all.  Would Japan still be struggling with cash coins, or would they have an entirely different currency by now?

Every currency has a fascinating history attached to it, but what comes before each particular currency can be just as interesting since it provides clues as to why the main currency was introduced in the first place.  In the case of the yen, it's clear that a proper and stable currency was needed that had a proper exchange rate attached to it, and the yen certainly achieved this aim.  While it has had periods of instability (as most currencies have had at one point or another) the yen has entered the 21st century as a force to be reckoned with, and there is no reason to suppose that trend won't continue for the foreseeable future.