Currency Profile: Japanese Yen (JPY)
The Japanese yen is the currency of Japan which is an island nation in East Asia.
The Japanese yen is the third most traded currency in the foreign exchange market after the United States dollar and euro. As a reliable and stable store of value, it is also regarded as a hard currency. Currently hard currencies are the United States dollar (USD), Euro (EUR), Swiss franc (CHF), British pound sterling (GBP), Japanese yen (JPY), Canadian dollar (CAD), and Australian dollar (AUD). The Japanese yen is also the forth reserve currency in the world. The major reserve currencies are the United States dollar, the euro, the British pound sterling, the Japanese yen and the Swiss franc and Canadian dollar.
Japanese yen history
The Japanese Yen was introduced in July 1871. The name of “yen” has the meaning of “a round object”. The currency yen was basically a dollar unit. It was descended from the Mexico peso, or even further ages ago, like all dollars, were origin from the silver Spanish dollar.
The Spanish dollar was created in 1497 in the Spanish Empire. It was a silver coin with approximately 38 mm diameter, worth eight reales. From the height of the Spanish Empire until the early 19th century, the Spanish dollars were widely used in the Americas, Southeast Asia, China coast and Japan. In Americas, the first United States dollar coins were issued similar in size and composition to the Spanish dollar. And the peso (Spanish dollar) were still continued to be used alongside even after the U.S. dollar introduction in 1792. The Mexican peso was introduced in 1821 when Mexico gained its independence, continuing the Spanish monetary system and with the peso of 8 reals the largest silver coin. In Southeast Asia, since middle-late nineteenth century, the Straits dollar currency was introduced and used among present nations of Malaysia, Singapore and Brunei. It was initially equivalent to the Spanish dollar or Mexican peso. In Hong Kong, a silver coin was introduced in 1866, descended from the Spanish dollar, with a diameter of 38 mm, a mass of 26.96 grams and a thickness of 2.80 mm. The dollars were only in circulation for three years. They were ceased minting and the Hong Kong government sold the mint machinery to Japan. The Japan, Meiji government then adopted a silver dollar coinage with the name of “yen” in 1871 and defined it as 24.26 grams pure silver or 1.5 grams pure gold on a bimetallic standard.
In 1897, Japan adopted a gold exchange standard like all other countries to begin pegging their silver coin units to the gold standards of the United Kingdom or the USA. Japanese yen was then initially pegged at the U.S. dollar at 1 JPY=0.5 USD. It was devalued to 1 USD =360 JPY between 1949 and 1971 and eventually gained a floated exchange rate in 1973. The exchange rate of Japanese yen and the United States dollar is at 1 USD = 93.4141 JPY as per date of March 1, 2013.
Japanese yen coins and banknotes
The Japanese yen is subdivided into 100 sen or into 1000 rin, although the smallest circulating denominations are 1 yen coins.
Currently in circulation coins are 1, 5, 10, 50, 100, 500 yen and banknotes are in denominations of 1000, 2000, 5000, 10000 yen.
The first coins were introduced in 1870 and the banknotes in 1872.
Important Economic Indicators for Japan
Since Japan is a manufacturing-oriented economy, manufacturing data tend to have the most significant impact on the yen. However, on a monthly basis, unless there is a big surprise, Japanese data do not typically move the currency. The most influential event risk is always the monetary policy announcement and trade balance. Aside from that, these are the numbers to watch.
If there is one piece of Japanese data to follow, it should be the quarterly Tankan Report. The Tankan is an economic survey of Japanese enterprises published four times a year. The survey includes more than 9,000 enterprises, which are divided into four major groups: large, small, and medium-sized companies, as well as principal enterprises. The survey provides us with an overall impression of the business climate in Japan and is widely watched and anticipated by foreign exchange market participants.
Balance of Payments
The monthly balance of payments report provides investors with insight into Japan’s international economic transactions that include goods, services, investment income, and capital flows. The current account side of BoJ can be used a good gauge of international trade. Figures are released on a monthly and semiannual basis.
Employment figures are reported on a monthly basis by the Management and Coordination Agency of Japan. The employment release measures the number of jobs and unemployment rate for the country as a whole. The data are obtained through a statistical survey of the current labor force. This release is a closely watched economic indicator because of its timeliness and its importance as a leading indicator of economic activity.
The industrial production (IP) index measures trends in the output of Japanese manufacturing, mining, and utilities companies. Output refers to the total quantity of items produced. The index covers the production of goods for domestic sales in Japan and for export. It excludes production in the agriculture, construction, transportation, communication, trade, finance, and service industries; government output; and imports. The IP index is then developed by weighting each component according to its relative importance during this base period. Investors feel IP and inventory accumulation have strong correlations with total output and can provide valuable insight into the current state of the economy.
Gross domestic product (GDP) is a broad measure of the total production and consumption of goods and services measured over quarterly and yearly periods in Japan. GDP is measured by adding total expenditures by households, businesses, government, and net foreign purchases. The GDP price deflator is used to convert output measured at current prices into constant-dollar GDP. Preliminary reports are the most significant for FX market participants.