Banknotes

The issuance of the yen banknotes began in 1872, two years after the currency was introduced.
Throughout its history, the denominations have ranged from 10 yen to 10000 yen.
Before and during World War II, various bodies issued banknotes in yen, such as the Ministry of
Finance and the Imperial Japanese National Bank. The Allied forces also issued some notes
shortly after the war. Since then, the Bank of Japan has been the exclusive note issuing authority.
The bank has issued five series after World War II. Series E, the current series, consists of 1000,
2000, 5000, and 10,000.

Determinants of value
Beginning in December 1931, Japan gradually shifted from the gold standard system to the
managed currency system.
The relative value of the yen is determined in foreign exchange markets by the economic forces
of supply and demand. The supply of the yen in the market is governed by the desire of yen
holders to exchange their yen for other currencies to purchase goods, services, or assets. The
demand for the yen is governed by the desire of foreigners to buy goods and services in Japan
and by their interest in investing in Japan (buying yen-denominated real and financial assets).
Since the 1990s, the Bank of Japan, the country's central bank, has kept interest rates low in
order to spur economic growth. Short-term lending rates have responded to this monetary
relaxation and fell from 3.7% to 1.3% between 1993 and 2008. Low interest rates combined with
a ready liquidity for the yen prompted investors to borrow money in Japan and invest it in other

countries (a practice known as carry trade). This has helped to keep the value of the yen low
compared to other currencies.

International reserve currency

The Special Drawing Rights (SDR) Valuation is an IMF basket of currencies, including the
Japanese yen. The SDR is linked to a basket of currencies with 44% for the dollar, 34% for the
euro, and 11% each for the yen and pound sterling. The exchange rate for the Japanese yen is
expressed in terms of currency units per U.S. dollar; other rates are expressed as U.S. dollars per
currency unit. The SDR currency value is calculated daily and the valuation basket is reviewed
and adjusted every five years. The SDR was created in 1969 to support the fixed exchange
system.
Critics worry that the SDR (Special Drawing Rights) or the amount of SDRs will not rival the
dollar, euro or yen:
Far from becoming a separate international currency, the SDR will remain a derivative of the
dollar and a few other major national currencies.
Also, the SDR does not contain the Chinese Yuan, Indian Rupee, Australian Dollar or Canadian
Dollar, which are important benchmark or secondary global reserve currencies.
Modern era: Japanese yen (1871present)

Daijkansatsu notes () denominated in Ry, 1868, Japan.

Following 1868, a new currency system based on the Japanese yen was progressively established
along Western lines, which has remained Japan's currency system to this day.

Immediately after the Meiji Restoration in 1868, previous gold, silver and copper coins, as well
as feudal notes were allowed continued circulation, leading to great confusion. In 1868, the
government also issued coins and gold-convertible paper money, called Daijkansatsu (
), denominated in Ry, an old unit from the Yedo period, and private banks called Kawase
Kaisha were allowed to issue their own currency as well. Complexity, widespread counterfeiting
of gold coins and feudal notes led to widespread confusion.
Birth of the yen: New Currency Act (1871)
Main article: Japanese yen

Early one yen gold coin.

First Meiji one yen banknote, Meiji Tshsatsu (), 1872.

Through the New Currency Act of 1871, Japan adopted the gold standard along international
lines, with 1 yen corresponding to 1.5g of pure gold. The Meiji government issued new notes,
called Meiji Tshsatsu () in 1872, which were printed in Germany.
Silver coins were also issued for trade with Asian countries who favoured silver as a currency,
thus establishing a de facto gold-silver standard.[1]
National Bank Act (1872)

American banknote, and Japanese 1873 banknote closely following the US design.

Early 1 yen banknote, front and reverse. National Bank notes, 1873.

The National Bank Act of 1872 led to the establishment of 4 banks between 1873 and 1874, until
there were more than 153 national banks by the end of 1879. The national banks issued
identically designed convertible notes, which were effective in funding the industry and
progressively replaced government notes. In 1876, an amendment allowed the banks to make the
banknotes virtually non convertible. These national banknotes imitated the design of American
banknotes, although the name of the issuer was different for each.
Severe inflation broke out with the Seinan Civil War in 1877. This was controlled by the
reduction of government spending and the removal of paper currency from circulation. During
the Seinan Civil War, an original type of paper money was issued by the rebel leader Saigo
Takamori in order to finance his war effort.
In 1881, the first Japanese note to feature a portrait, the Empress Jingu note (), was
issued.

Bank of Japan (1882)

Bank of Japan silver-convertible one yen banknote, 1885.

Bank of Japan gold-convertible yen banknote, 1900.

In order to regularize the issuance of convertible banknotes, a central bank, the Bank of Japan,
was established in 1882. The bank would stabilize the currency by centralizing the issuance of
convertible banknotes. The first central banknotes were issued by the Bank of Japan in 1885.
They were called Daikokusatsu (), and were convertible in silver.
Following the devaluation of silver, and the abandon of silver as a currency standard by Western
powers, Japan adopted the gold standard through the Coinage Law of 1897. The yen was fixed at
0.75g of pure gold, and banknotes were issued which were convertible into gold. [1] In 1899, the
National Banks banknotes were declared invalid, leaving the Bank of Japan as the only supplier
of currency.

20th century

Gold standard one yen banknote, 1916.

Japanese Government Asian banknotes during the Second World War.

Various types of "B Yen" notes used by American occupation forces in 1945-1958.

A modern 2,000 yen note.

During World War I, Japan prohibited the export of gold in 1917, as did many countries such as
the United States. Gold convertibility was again shortly established in January 1930, only to be
abandoned in 1931 when Great Britain abandoned the gold standard. Conversion of banknotes
into gold was suspended.
From 1941, Japan formally adopted a managed currency system, and in 1942 the Bank of Japan
Law officially suppressed the obligation of conversion.

In 1946, following the Second World War, Japan removed the old currency ( ) and
introduced the "New Yen" ( ). Meanwhile, American occupation forces used a parallel
system, called B Yen, from 1945 to 1958.
Since then, together with the economic expansion of Japan, the yen has become one of the major
currencies of the world.