Historic Roots of the Yo-Yo Yen (1859–1949)

The pre-historical period of the Japanese yen begins and ends with critical decisions made by the USA. The so-called Ansei-Man’en monetary reforms of 1859/60 which accompanied the re-establishment of diplomatic and trade relations between Japan and the Western Powers after more than two centuries of seclusion were largely influenced by US pressures. Less than a century later, in the aftermath of the Pacific War, it was the US Occupation Authorities who relaunched the yen at a rate of 360 to the US dollar as part of the Dodge Plan. The pattern of critical US intervention was to continue into the modern era – including, first, the forced revaluation of the yen in August 1971 under irresistible pressure from the Nixon Administration and second, the Plaza Accord of 1985. In the middle years of the 1990s (1993–7) the Clinton Administration sought to manipulate the yen on a number of occasions. But the violent fluctuations and misalignment of the yen during that Lost Decade for the Japanese economy stemmed also from many important sources inside Japan.