# Japanese Yen (JPY)
> Japan's national currency, issued by the Bank of Japan, is the world's third most traded currency and the primary vehicle for carry trades that destabilize Asian markets when unwound.

**Meta:** type: reference · date: 2026-07-03 · heads:  · 4 takes · 1 lenses · 2 regions

## What it is

The Japanese yen (JPY) is the official currency of Japan, issued and managed by the Bank of Japan. Japan moved to a freely floating exchange rate in March 1973 after the collapse of the Bretton Woods system. Two institutions govern the yen: the Bank of Japan's Policy Board sets the overnight call rate; Japan's Ministry of Finance holds the formal authority to order foreign-exchange intervention, executed through the Bank of Japan as agent.

As of April 2025, the yen is the world's third most traded currency, appearing on one side of 16.8% of global FX transactions in a market with daily turnover of US$9.6 trillion, per the BIS April 2025 Triennial Central Bank Survey. The yen holds an 8.07% weight in the IMF Special Drawing Rights basket (effective August 1, 2022), alongside the US dollar, euro, Chinese renminbi, and British pound. Its role as the world's primary carry-trade funding currency makes its exchange rate a live gauge of global risk appetite.

## History

Japan introduced the yen in 1871 under the New Currency Act, replacing a fragmented feudal domain-note system, and pegged it to gold. Japan abandoned the gold standard in 1931. After World War II, the yen was fixed at ¥360 per US dollar under the Bretton Woods system, a peg that held from 1949 until August 1971, when US President Richard Nixon suspended dollar-gold convertibility. Japan adopted a floating rate in March 1973.

The 1985 Plaza Accord, signed by the G5 in New York, produced a coordinated dollar devaluation; the yen strengthened from approximately ¥240 to below ¥150 per dollar within two years, then reached ¥79.75 per dollar in April 1995, the yen's all-time high against the US dollar. Two decades of deflation followed. Prime Minister Shinzo Abe launched quantitative and qualitative easing in late 2012, pressing the Bank of Japan into aggressive asset purchases that kept the yen weak and policy rates near zero. The Bank of Japan introduced a negative deposit rate of minus 0.1% in January 2016 and maintained it until March 2024, anchoring the yen as the world's dominant carry-trade funding currency for nearly a decade.

## Current state

As of July 3, 2026, the yen is at its weakest level against the US dollar in four decades. The Bank of Japan raised its policy rate to 1.0% on June 16, 2026, its highest since 1995, but the US Federal Reserve held its target range at 3.50-3.75% at its June 17 meeting, sustaining a rate differential that keeps short-yen carry trades profitable. The yen fell to 162.27 per dollar on June 30, as documented in [日元6月30日跌至162.27，突破2024年干预水平，财务大臣警告将采取果断行动](/zh/n/japan-yen-162-jun30), breaching the 161.95 level at which Japan's Ministry of Finance conducted large-scale intervention in July 2024. That 2024 operation deployed ¥11.7 trillion (approximately US$72 billion) and was fully retraced within weeks. Tokyo's June 2026 core CPI rose 1.6% year-on-year, documented in [东京核心CPI 6月同比升1.6%，创3月来新高，日本央行7月决议窗口收窄](/zh/n/japan-tokyo-cpi-june-2026), and overnight index swaps moved to price approximately 70% probability of a Bank of Japan hike at the July 30-31 meeting. Despite those expectations, the yen stayed pinned near 40-year lows, as covered in [日元在东京6月CPI加速后仍徘徊于40年低点附近，干预风险上升](/zh/n/japan-yen-40yr-low-jun26), because markets judge a policy rate of 1.0-1.25% as far below the level needed to shift carry-trade economics.

## Relationships

The yen's bilateral rate against the US dollar is the primary signal of global carry-trade conditions. When the rate differential between Japan and higher-yielding economies is wide, leveraged short-yen positions build across emerging-market bonds, US Treasuries, and Asian equities. A rapid reversal, as in August 2024, forces simultaneous deleveraging, transmitting yen volatility into global financial conditions. Japan's import costs for food and energy, both priced in US dollars, rise sharply when the yen weakens, adding an inflation channel that complicates the Bank of Japan's normalization path.

## What to watch

The Bank of Japan's July 30-31, 2026 policy meeting is the next rate decision. Japan's shunto wage data, due in July, is the Bank of Japan's stated prerequisite for further normalization: sustained wage-led inflation confirms price gains are structural rather than yen-weakness pass-through. Whether Japan's Ministry of Finance moves from verbal warnings to actual FX intervention, coordinated with the US Treasury, will determine the near-term trajectory. Japan's Ministry of Finance has issued verbal warnings five times since USD/JPY crossed 160; markets watch whether the threshold for action is 162, 165, or higher.

## Regional takes (batched by bias / lens)

### official record
- **Bank of Japan, Foreign Exchange Rates** (Japan, en) — Bank of Japan official daily release of USD/JPY and other bilateral rates since 2007; the primary institutional record of the yen's spot market level, published each business day by the Bank of Japan's Statistics Department.
  Source: https://www.boj.or.jp/en/statistics/market/forex/fxdaily/index.htm
- **Bank for International Settlements, April 2025 Triennial Survey** (Global, en) — BIS April 2025 Triennial Central Bank Survey of FX market turnover: the yen appeared on one side of 16.8% of global FX transactions in a market averaging US$9.6 trillion per day, making JPY the third most traded currency after the US dollar and euro.
  Source: https://www.bis.org/statistics/rpfx25_fx.htm
- **International Monetary Fund, Special Drawing Rights Factsheet** (Global, en) — IMF factsheet on the SDR basket composition; the Japanese yen holds an 8.07% weight effective August 1, 2022, alongside the US dollar, euro, Chinese renminbi, and British pound sterling.
  Source: https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr
- **International Monetary Fund, SDR Valuation Basket 2022** (Global, en) — IMF Executive Board 2022 SDR valuation review establishing new currency amounts effective August 1, 2022; sets the yen's basket weight at 8.07%, reduced from 8.33% in the 2016 review when the Chinese renminbi was added.
  Source: https://www.imf.org/en/Topics/special-drawing-right/sdr-valuation-basket/Issues/2022/070122

## Across the graph
- Related: [[japan-yen-162-jun30]], [[japan-tokyo-cpi-june-2026]], [[japan-yen-40yr-low-jun26]]
- Entities: Currency:japanese Yen, Org:bank of Japan, Org:federal Reserve, Currency:us Dollar, Imf

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Canonical: https://rbtfl.xyz/zh/n/japanese-yen-dossier