Forex Trading

The Japanese yen was first recognized as currency in 1870 and was modeled after the monetary system in Europe. After War World II, the Japanese yen lost most of its value due to instability. Now, the yen has more value and compares more consistently with the US dollar.

The value of the Japanese yen is determined in the foreign exchange markets by simple supply and demand. When a yen holder wants to exchange that form of currency for other currencies in order to purchase goods, services or assets, the money is traded on the Forex. When the demand for the yen is high, the value goes up. Until the Bretton Woods System collapses in 1971, the value of the Japanese yen was set at Y360 per US $1. Those prices helped stabilize the Japanese economy. When that system was done away with, the value of the yen compared to the US dollar became more competitive. Up to that point in time, the yen was undervalued.

As time progressed, the Japanese government was concerned that if the value of the yen rose, it would hurt the export business in Japan. They thought it might make Japanese products less competitive and would negatively affect the industry. This is when the Japanese government often intervened with the Forex to affect the value of the yen. This was not helping and the value of the yen climbed steadily. When the increased costs of oil began to change from 1974 to 1976, the yen began to depreciate. There were several fluctuations of the yen during the late seventies and early eighties as the price of oil increased. The yen was weak compared the US dollar until the late eighties when the value began to rise because of the trade surplus that was taking place in Japan. 

More on the Japanese Yen and Forex in the next post