Understanding the Yen

The fourth most traded currency in the forex market comes from the land of the rising sun, and it is of course the Japanese Yen. The JPY became Japan’s official currency, after a long period of varying and multiple monetary systems, in the late 19^th century after the Meiji Restoration. The Yen was then set at par with the US dollar, however as early as 1931, Japan left the gold standard in favor of managed currency.

A managed currency system means that the Yen’s value in the forex market is controlled by supply and demand forces, and the Japanese government retains the ability to regulate the Yen, though until late there was no consideration of doing so.

The effects of the major crisis caused by the burst of the Japanese financial bubble in the early 90s is still felt in the Yen’s value, although it has been holding up quite well under the recent critical circumstances of the global economic struggle. In late 2008 the Yen’s value rose significantly, to the point that the Japanese government considered intervening and lowering the currency’s price to prevent long term damage.

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