Japan's national currency is the yen. After the US dollar and the euro, it is the third most traded currency on the foreign exchange market. In addition, it is often used as a third reserve currency in place of the euro and the US dollar.
The modern currency system in Japan was established by the New Currency Act of 1871, which set the yen's definition at 1.5g of gold or 24.26g of silver and decimalized it into 100 sen or 1,000 rin. Both the earlier Tokugawa coinage and the different hansatsu paper currencies produced by the han were replaced by the yen. In 1882, the Bank of Japan was established and granted exclusive authority over managing the money supply.
The yen lost a lot of its value after World War II. As part of the Bretton Woods system, the yen's exchange rate was set at 360 per US dollar in order to stabilize the Japanese economy. The yen depreciated and was allowed to float when that system was abandoned in 1971. Due to the 1973 oil crisis, the yen had phases of gain and depreciation, reaching a value of 227 per US$ by 1980. It had previously risen to a high of 271 per US$ in 1973.
The Japanese government concentrated on a competitive export market and worked to maintain a trade surplus to keep the yen's exchange rate as low as possible. This was briefly altered by the Plaza Accord of 1985; the exchange rate dropped from an average of 239 yen to 128 yen to 80 yen to the dollar in 1995, substantially raising the value of Japan's GDP in dollars to virtually that of the United States. But the value of the yen has significantly dropped since then. The Bank of Japan continues to follow a policy of interest rates that are zero or almost zero, and the Japanese government has in the past adopted a strong anti-inflation strategy.