It is the third-most traded currency in the foreign exchange market , after the United States dollar and the euro. The New Currency Act of introduced Japan's modern currency system, with the yen defined as 1. The yen replaced the previous Tokugawa coinage as well as the various hansatsu paper currencies issued by feudal han fiefs. The Bank of Japan was founded in and given a monopoly on controlling the money supply.
Following World War II , the yen lost much of its pre-war value. When that system was abandoned in , the yen became undervalued and was allowed to float.
Since , the government of Japan has maintained a policy of currency intervention, so the yen is under a managed float regime. The Japanese government focused on a competitive export market, and tried to ensure a low exchange rate for the yen through a trade surplus. Accordingly, Portuguese missionaries spelled them as "ye". Walter Henry Medhurst , who had neither been to Japan nor met any Japanese people, having consulted mainly a Japanese-Dutch dictionary, spelled some "e"s as "ye" in his An English and Japanese, and Japanese and English Vocabulary Hepburn revised most "ye"s to "e" in the 3rd edition [ 18 ] to mirror the contemporary pronunciation, except "yen".
Although the Edo Shogunate collapsed with the Meiji Restoration and a new government was born, the monetary system still took over that of the former entity. During this unstable period, the confusion caused by this form of exchange caused economic turmoil. The first gold yen coins consisted of 2, 5, and 20 yen coins which were struck throughout Five yen coins were first struck in gold for the Japanese government in at the San Francisco Mint.
The new currency was gradually introduced beginning from July of that year. Japanese yen denominated paper currency was also conceived with the coins in as Meiji Tsuho notes by Italian engraver Edoardo Chiossone.
