Course history

The history of the yen dates back to the late 19th century. At that time, the Japanese government carried out economic reforms, m.in. in order to unify the complex monetary system, inspired by the European decimal system. The yen became less important after World War II, and its exchange rate was pegged to the US dollar – 360 yen was equivalent to 1 dollar.

It was so until the 70s of the twentieth century. Later, the Japanese government began to rebuild the economy by focusing on trade and exports, and intervened when there were rapid changes in the yen exchange rate. This is one of the reasons why the currency has remained at a similar, stable level for many years, which is exactly what we are talking about at Webinar Universe.

Top currency pairs

Traders and recommended forex brokers know that on the charts of currency pairs, the Japanese yen is usually the quote currency. This means that the smallest amount by which the quote of a given pair can change is denominated in yen. Profits and losses are also counted in yen. The main currency pair is USD/JPY (US dollar against the yen). USD/JPY is the second most traded currency pair in the world. It is second only to the eurodollar in terms of turnover on the forex market. It is a very liquid pair due to the fact that both currencies are among the world's leading reserve currencies. It is also sensitive to macroeconomic data from the US and Japan, as well as decisions from the Federal Reserve and the Bank of Japan.

It is called "ninja" in the forex market. Cross pairs, i.e. those in which there is no US dollar, are m.in. GBP/JPY (British pound against the yen) and AUD/JPY (Australian dollar against the yen), as well as PLN/JPY (Polish zloty against the yen). The Japanese yen, next to the Swiss franc, is treated as a "safe haven". This means that its value is stable during periods of market turmoil. Bonds in the Land of the Rising Sun are characterized by low yields and have remained at an equal level for many years. This stability is attractive in the eyes of investors who store their savings in Japanese assets.

Course Factors

Japan is a country strongly focused on exports. It accounts for more than 40% of economic activity, and the yen exchange rate is of great importance to the country's government. Interference in the exchange rate makes it possible to stimulate the growth of the national economy. A weak currency makes products manufactured for export cheaper, which in turn increases the attractiveness of prices in the eyes of foreign importers. In addition, other economic factors are not without significance for the yen exchange rate. These are the bank's decisions regarding monetary policy, the Tankan report (quarterly), which presents the results of sentiment surveys in Japanese companies, data on industrial production, industrial orders, trade and current account balance, retail sales data, as well as the industrial activity index (PMI) and the services sector activity index.

Despite the fact that the Japanese yen is considered to be one of the most stable currencies, it is always important to remember that the forex market is prone to dynamic changes and it is impossible to predict them all. We cover this topic in detail on Webinar Universe, where many online training courses are available.

Predictions for the future...

According to analysts, the Japanese yen could be one of the best performing currencies on the market in the near future. The most important takeaway is the one regarding the USD/JPY pair. A further increase in yields in the US and the expected changes in inflation forecasts from the Bank of Japan (BoJ) may increase the importance of this pair. It highlights the change in Japan's monetary policy, including the exit from negative interest rates and the dismantling of the yield curve control program. These measures are aimed at narrowing the interest rate differential between Japan and the G10, which could have a potentially positive impact on the yen. At the same time, it should be remembered that forecasts cannot be treated as an oracle, despite their frequent accuracy.

Although the yen exchange rate is nominally very low on a global scale, this currency is one of the most important in the world. The smallest denomination in existence is 1 Japanese yen of negligible value. Characteristic are the perforated 5 and 50 yen coins. Demand for yen is rising as global markets begin to turbulence. The currency is attractive to investors who borrow in yen and then look for opportunities in riskier markets.