The lowdown on the Japanese yen
The third most traded currency in the world, second only to the mighty dollar and the ever-expanding euro, Japanese yen is certainly a powerful currency. It’s actually pronounced ‘en’, but the common mispronunciation of ‘yen’ won’t get you any funny looks because it’s widely understood.
The word yen means ‘round’ in Japanese, catching on from when Spanish and Mexican coins arrived in China in the 17th century, where they were known as ‘silver round’ because, well, they were round silver coins. These coins were common across all of Southeast Asia and the nickname soon made its way over to Japan too.
By the 19th century, the Hong Kong silver dollar started being made in a likeness of the Spanish coins. The Chinese didn’t really trust the silver value of the new coins and preferred to carry on using the more familiar Spanish and Mexican dollars. Eventually, the Hong Kong government admitted defeat, stopped making the coins and sold the mint machinery to Japan instead. On May 10 1871, the Japanese yen was born.
In Japan you’ll find that most people pay with cash and in some places, it’s the only choice – so it’s wise to keep some on you. But don’t worry about carrying it around, because Japan has one of the lowest crime rates in the world!
A look back at British pounds to Japanese yen rates
When the Japanese yen was introduced in 1871, its value was more or less the same as the US dollar, since both has descended from the Spanish currency. Following the silver devaluation in 1873, the yen was devalued against the US dollar, which used the gold standard, continuing to fall to ¥1 to $0.50 by 1897, which was around £2.80 at the time.
Japan adopted the gold standard in 1897 and pegged the value of the yen at $0.50 until they left the gold standard in December of 1931. This saw the yen fall to $0.30 by July 1932 and to $0.20 by 1933, with the dollar exchanging at around $3.40 to £1 at the time. The yen remained steady at around $0.30 until Japan’s entry into the Second World War on December 7 1941, where it fell again to $0.23. By this time, the dollar was pegged to the pound at a rate of £$4.03 to the pound.
Post-war Japanese yen
Wartime inflation saw the yen drop heavily and on April 25 1949, the US fixed the rate at ¥360 per $1 (with the dollar still pegged at $4.03 to £1) as part of a plan to stabilise the Japanese Economy through the Bretton Woods System. The exchanged rate stayed pegged at this level until 1971, when the US abandoned the gold standard.
By 1973 the yen had risen to ¥271 per $1 (with around $2.40 to £1), until the 1973 oil crisis hit. The increasing costs of imported oil meant that the yen depreciated to ¥300 by 1976, with the re-emergence of the trade seeing it rise back up to ¥211 in 1978 (with around $1.90 to £1), until the second oil shock in 1979 saw rates drop back to ¥227 by 1980.
The Plaza Accord and the ‘80s yen
In 1985, things took a dramatic turn when the Plaza Accord – an agreement by finance officials that agreed that the dollar was overvalued – was signed. This inherently meant that the yen was undervalued, and lead to its rise from ¥239 per US$1 in 1985 to ¥128 in 1988, almost doubling its value against the dollar, at a time when the dollar was valued at around $1.50 to the pound. By 1992, it had continued to rise, hitting ¥123 in December 1992 and by April 1995, the yen had peaked at an incredible 80 yen to the dollar, with $1.60 to the pound, almost bringing Japan’s economy to the same size as the US.
The post-bubble years
This inflation of Japan’s economy became known as the Japanese asset price bubble, and rates dropped after this bubble burst. By March 2002, the yen had dropped to a low of ¥181 to £1. However, when the global economic crisis hit in 2008, major currencies began declining relative to the yen and it rose once more, reaching ¥118.74 by October 2011.
However after this, the yen began to steadily weaken, reaching around ¥183 by October 2015 – great news for your pounds!
Planning a trip to Japan soon? Take a look at our essential guide to the ultimate Japanese trip.
