The Japanese Yen (¥, JPY) has been the official currency of Japan since it was introduced by the Meiji government in 1872 to replace the byzantine system of regional currencies inherited from the Edo Period. When Japan first went on the gold standard in 1897, the value of the yen was set to equal the value of 1.5 grams of pure gold. Originally there were smaller units of currency--the sen (1/100 yen) and the miniscule rin (1/10,000 yen)--but inflation eventually made these units worthless and they were phased out in 1953.

Following World War II the yen was extremely devalued, and was pegged to the US dollar for many years at a rate of 360 yen per dollar under the postwar Bretton Woods System of fixed currency exchange rates, greatly spurring Japanese growth by making Japanese products much cheaper than they otherwise should have been. This situation lasted from 1949 when the Bretton Woods agreement was signed until 1971 when the yen had become so undervalued and Japan had become such an economic powerhouse that Nixon was forced to decouple the yen from the dollar by abrogating the entire Bretton Woods arrangement, in order to prevent the US current account deficit from exploding out of control. The yen was then briefly recoupled to the dollar at a rate of 308 yen per dollar under the Smithsonian Agreements before the major trading nations of the world finally decided to allow their currencies to float freely in 1973.

The yen then soared to the low 200s against the dollar before the oil shocks knocked it back down to the neighborhood of 300. The yen remained weak into the 1980s, rallying only up to the low 200s until the Plaza Accords in 1985 acknowledged that the dollar was overvalued against the yen, which combined with Japan's soaring bubble economy, spurred investors to chase heavily after the yen for the next decade. At its all time zenith in 1995, the yen touched 79 to the dollar, which briefly meant that Japan's economy was theoretically equal in size to that of the United States. But by then the collapse of the bubble meant that Japan's economy was already in the doldrums, and the yen quickly fell back to the low hundreds, where it has more or less remained to this day.

Today the yen is the third most traded currency, behind only the US dollar and the Euro, and is heavily favored as a reserve currency and used in the carry trade due to Japan's relatively stable economy and exceedingly low interest rates.