The Yen

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The Yen

In only 142 years Japan's economy changed from an antiquated monetary system to the world's

third most traded currency and forth most used reserve currency after the U.S. dollar, the euro, and the

pound sterling. Truly the Japanese Yen is still an unappreciated economic force waiting for it's chance

to take center stage on the world market.

CREATION OF THE YEN

The Yen came into existence May 10, 1871 after the Meiji government chose to abandon

Tokugawa coinage, a complex monetary system of Japan's Edo period, and passed the “New Currency

Act of 1871”. The new system stipulated the adoption of the decimal accounting system for the new

currency and resulted in the Yen basically being a dollar unit with several less valuable denominations,

the Sen (1/100) the value of the Yen and the Rin (1/1000) the value of the Yen, both of which were

taken out of circulation at the end of 1953. The Yen was legally defined as 24.26 grams of pure silver

or 1.5 grams of pure gold. Following the silver devaluation of 1873 the Yen quickly devalued against

the US and Canadian Dollars, which used the gold standard for their currency. Due to the large loss of

value of the Yen after 1873 Japan adopted a gold standard for the Yen in 1897 which froze it's value at

1 Yen being worth $0.50 US.

MAJOR EVENTS INVOLVING THE YEN

Between 1980 and 1985 the U.S. Dollar had appreciated significantly against the Japanese Yen,

Deutsche Mark, French Franc and British Pound. Because of this American industry was experiencing

major difficulties competing in the world market and an escalating current account deficit. It was then

decided that an agreement between all the involved currencies countries of origin would be needed to

artificially depreciate the U.S. Dollar against the German Deutsche Mark and Japanese Yen. This was

called the Plaza Accord and was signed by all five involved governments

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