Just seven currencies account for 80% of the forex market, and the Japanese yen is one of the largest currencies, in terms of international trade and forex trading. That is only fitting, as Japan is one of the largest economies in the world, with the third-highest GDP among nations and the fourth-largest exporter in dollar terms.
All of the major currencies in the forex market have central banks behind them. In the case of the Japanese yen, that is the Bank of Japan. Like most developed country central banks, the Bank of Japan has a mandate to act in a fashion that encourages growth and minimizes inflation. In the case of Japan, however, deflation has been a persistent threat for many years, and the BOJ has pursued a policy of very low rates in the hopes of stimulating demand and economic growth - at various points in the 2000s, real rates in Japan were actually slightly negative.
To find out more about the Japanese economy and what drives the yen, read on...
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