What it is
The currency of Japan. Yen pairs are quoted to two or three decimal places where most pairs use four or five, so one pip in a yen pair is 0.01.
Who issues it
The Bank of Japan issues the yen and sets monetary policy through its Policy Board. Decisions to buy or sell yen in the currency market are taken by the Ministry of Finance, and the Bank carries them out.
How it is commonly described
- Reserve currency
- Held in quantity by central banks and governments as part of their foreign reserves.
- Safe haven
- Commonly bought when investors are cautious. The label describes past behaviour; it does not say what happens next time.
- Funding currency
- Often borrowed, when its interest rates are low, to hold assets that pay more elsewhere.
Japanese interest rates were very low for decades, so the yen was often borrowed to hold assets that paid more elsewhere: the carry trade. When investors become cautious such positions tend to be closed, which means buying yen back, and that is one reason the yen is described as a safe haven. Japan also holds large assets abroad.
These are descriptions people use, drawn from how the currency has commonly behaved. They are not promises about how it will behave.
What typically moves it
- The gap between Japanese interest rates and those abroad, above all US rates
- Bank of Japan policy, and any change in its stance
- Risk appetite, through the opening and closing of carry trades
- The cost of imported energy and raw materials, nearly all of which Japan buys from abroad
- Statements by the Ministry of Finance about the currency, and intervention when it happens
These are the things people who follow this currency usually watch. They explain how the market works; they do not say what the exchange rate will do next.
The scheduled releases to know
- Policy Board decision and the Outlook ReportPublished by Bank of JapanExplainer: Rates
- Tankan survey of business conditionsPublished by Bank of JapanExplainer: Tankan
- Consumer Price Index, national and for TokyoPublished by Statistics Bureau of JapanExplainer: CPI
- Gross Domestic ProductPublished by Cabinet OfficeExplainer: GDP
- Trade statisticsPublished by Ministry of FinanceExplainer: Trade balance
No dates or figures are shown here: each publisher’s own calendar is the authority. The explainers are in Economic Events; a release without a link has no explainer on this site yet.
Its main session
Tokyo. Japanese data and Bank of Japan decisions arrive in Tokyo hours. The yen is also heavily traded in London and New York, because its pair with the dollar responds to US interest rates.
At GIO4X
GIO4X lists 3 currency pairs that contain the Japanese yen. Each pair’s contract and published conditions are on its instrument page, where they are labelled as indicative. They are not repeated here.
Other GIO4X instruments whose pages name JPY:
A short history
The yen was introduced in 1871, in the Meiji era, to replace a patchwork of older coinages. The Bank of Japan was founded in 1882. After the Second World War the yen was fixed to the US dollar; it has floated since 1973. In the Plaza Accord of 1985 the large economies agreed to act together to weaken the dollar, and the yen rose sharply in the years that followed.
Words worth knowing
A reference page. Educational information, not investment advice or a recommendation to trade. It gives no exchange rate, no interest rate and no forecast.