January 27, 2023

Yen: The currency of the Land of the Rising Sun

LQDFX term Yen

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The yen, a preferred currency in times of market turbulence, is the official currency of Japan. Being a currency usually bought during times of political uncertainty, it is the third most traded in the Forex market.

Forex traders consider it a prominent gauge of investor risk aversion. The Japanese currency is a risk barometer. Further, it is typically a safe-haven currency during times of economic and political instability.

The Bank of Japan is the central bank of the “Land of the Rising Sun”. It has the authority to issue Yen banknotes. Further, the Bank receives the new banknotes manufactured by the National Printing Bureau and puts them into circulation. BoJ adjusts interest rates for the purpose of currency and monetary control.

Japan’s economy is highly developed and one of the largest in the world. In addition, the Land of the Rising Sun is the world’s third largest automobile manufacturing country. The Japanese government focuses on a competitive export market. Through their monetary policy the government tries to ensure a low yen value through a trade surplus.

Yen derives from the Japanese word “round” linked with the Chinese yuan, North Korean won as well as South Korean won.

There are six varieties of coins in circulation in Japan. Denominations range from ¥1 to ¥500. Although each one has its own distinct feel, several incorporate high-tech designs to prevent counterfeiting.

Yen’s symbol is ¥, its code is JPY, while its abbreviation is JP¥.

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Interesting Facts about the Japanese currency

  • The 1-yen coin is made out of 100% aluminium and can float on water if placed correctly.
  • Instead of displaying the Gregorian calendar year of mintage like most nations’ coins, yen displays the current emperor’s reign year.
  • Notes out of circulation are shredded and recycled for use as housing materials, solid fuel, toilet paper, office supplies

Three Economic Releases affecting the Yen

  • Domestic Corporate Goods Price Index Japan (CGPI)

The Domestic Corporate Goods Price Index Japan measures the prices of goods created at the producer and wholesaler level. This index tracks changes in supply side prices within the Japanese economy. Changes in the CGPI often precede changes in the overall Consumer Price Index. Thus, a large increase in the domestic CGPI will lead to a large increase in the overall consumer price index.

Domestic Corporate Goods Price Index Japan is published on the eighth business day of each month. It typically affects equities, commodities and forex markets following its release.

  • Japan Inflation Rate

Inflation is a key economic indicator investors can use when evaluating both Japan’s economy and its currency. For official figures for price level increases, traders can visit the Ministry of Internal Affairs & Communications website.

  • TANKAN SURVEY

The Tankan survey is one of the key financial measures that traders may consider when evaluating Japan’s basic monetary unit. It has considerable influence in stock prices and the currency rate. It is an economic survey covering Japanese businesses with a specified minimum amount of capital.
The central Bank of Japan releases the Tankan Survey four times a year.

The companies report their current trends and conditions in their respective industries. Analysts also take into consideration the expected business activities for the next quarter and year.

Sources: Wikipedia, investing.com

PLEASE NOTE The information above is not investment advice.