Understanding the Japanese yen

One of the most frequently traded currency pairs on the FX market is USD/JPY, nicknamed ”The Gopher”.

USD = United States dollar

JPY = Japanese yen

This currency pair is caracterized by high liquidity and many Forex trading platforms offer USD/JPY trading with very tight spreads.

Short facts about the Japanese economy

Population: 125.88 million (estimated for 2020)

Labour force: 68.7 million (estimated for 2020)

Employment rate: 60.3% (estimated for 2020)

Unemployment: 3.0 (August 2020)

Nominal GDP: 4.9 trillion USD (estimated for 2020)

GDP per capita: 39,048 USD (estimated for 2020)

GDP growth: 0.3% in 2018, 0.7% in 2019, -5.3% estimated for 2020

Inflation: -0.1% (estimated for 2020)

Main industries

  • Motor vehicles
  • Electronic equipment
  • Machine tools
  • Steel
  • Nonferrous metals
  • Ships
  • Chemicals
  • Textiles
  • Processed foods

Japan´s economy and monetary policy

Japan has a highly developed free-market economy. It is the third-largest economy in the world by nominal gross domestic product and the fourth-largest by purchasing power parity.

In early April 2013, the Bank of Japan announced that they would expand their Asset Purchase Program by $1.4 trillion over the course of two years with the aim of bringing the country from deflation to inflation. The aim for the Bank of Japan is 2% inflation.

In February 2019, a free trade deal between Japan and the European Union commenced, creating the world´s largest free trade zone. Among other things, the deal reduced tariffs on Japanese cars by 10% and duties on cheese by 30%.

In October 2020, Japan and the United Kingdom signed the first post-Brexit free trade agreement.

About the Japanese yen

Short facts

ISO 4217 code: JPY

Symbol: ¥

Alternative abbreviation: JP¥

The Japanese yen is the official currency of Japan. It is the third most traded currency on the FX market by volume, surpased by only the USD and the EUR.

The JPY is also a common choice for reserve currency holdings, after the USD, EUR and GBP.

Early history

  • Before the Meiji Restoration, each feudal chief issued his own money.
  • The Japanese yen was established by the New Currency Act of 1871. Back then, 1 yen was worth 1.5 grams of gold or 24.26 grams of silver.
  • The name yen is derived from a word that means ”round” in Japanese. It is related ot the Chinese yuan, the South Korean won and the North Korean won.
  • The Bank of Japan was established in 1882.


After the end of World War II, the rate of the JPY wad fixed at 360 JPY per 1 USD, as part of the Bretton Woods system.

Post-Bretton Wood

When the Bretton Wood system was abandonned in 1971, the yen was allowed to float.

In 1973, the Japanese government launched their policy of currency intervention. Since then, the yen has been under a so called ”dirty float” regime.

The 1985 Plaza Accord

From 1973, the aim of the Japanese government had been to keep the value of the yen low, to make Japanese products extra competitive on the export market.

The 1985 Plaza Accord worked against the wishes of the Japanese government, and the yen rose from its average of 239 JPY per 1 USD in 1985 to a peak of 128 JPY per 1 USD in 1988. By 1995, 1 USD was worth around 80 JPY.