Japan has a free- floating exchange rate system against foreign currencies (one in which the exchange market determines exchange rates ). The rates fluctuate with the Japanese economy and those of its major trading partners, though the Bank of Japan intervenes in the
|Exchange rates: Japan|
|yen per US$1|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
market to ensure that fluctuations do not damage the Japanese economy. Tokyo is the Japanese main foreign-exchange market where about 99 percent of all foreign-exchange transactions are conducted.
Japan has not experienced sharp and sudden fluctuations in its exchange rates since the late 1970s, even with the economic decline of the early 1990s. The rate of exchange of the yen against the U.S. dollar was ¥94.06:$1 in 1995; it rose to ¥130.91 in 1998, and then began to decrease, to ¥113.91 in 1999 and to ¥108 in 2000. As a result of the foreign-exchange liberalization program, which began in the 1980s, and the deregulatory reforms in the 1990s, various restrictions on foreign-exchange transactions have been removed. The 1998 Foreign Exchange and Foreign Trade Law eliminated almost all remaining government restrictions and controls over foreign-exchange transactions. Consequently, companies are now allowed to trade foreign currencies and individuals can open bank accounts in foreign countries without requiring government authorization.
Japan has a stock market of global significance. The market capitalization of the Tokyo Stock Exchange, the largest in Asia, was $4 trillion in 1999, an increase from the 1995 level of $3.2 trillion.