For instance the Japanese 100 yen converts to just 1 Australian dollar.
In: Economics
As long as the number on the note matches the number on the price tag, everything works. What the number is is mostly irrelevant before space concerns.
If either number changes quickly, then you have a problem.
The currencies don’t have to match up in order to have an equal value. If I trade you 100 grapes for a watermelon, it can still be a fair trade.
Currencies are created to meet the needs of the country’s people. When the yen and won were created, for example, Japan and Korea were fairly poor countries (relative to Western nations). They needed goods and services in their country to be priced at values that “make sense” to ordinary trade. You don’t want a yen to be equal to a dollar in 1871 because then most people would be earning and buying and selling stuff in fractions of a yen. Unlike say Australia or the US, there is no fractional yen or fractional won whereas you have things like 10 cents or 25 cents.
As it turns out these countries developed economically and this in turn meant that “values” of the goods they produce now match the value of goods in developed countries. While in 1871 a worker in Japan would earn a few tens of yen for a days work, today a worker in Japan would earn a few tens of thousands of yen a day – and that in turn means goods are priced accordingly.
Massive inflation. The yen used to be worth about $0.50 from about 1900 until 1931. It used to be divided into 100 sen and even 1000 rin.
It fell somewhat when Japan left the gold standard and started printing more money, and the value largely collapsed over WW2. Eventually, the occupation government set the exchange rate at 360¥ to $1 in 1949, and killed off the sen and rin coins because they were worthless.
After currency exchange rates started floating again in the 1970s, the yen gained back some value, peaking at ~120 to the dollar and then back down to 150 or 170.
It matters less now with electronic money. Countries can redenominate currency (100 or 1000 old dollars = 1 New Dollar). IIRC there’s one where the current notes are labeled as e.g. “20 thousand pesos” so the digits are still 1, 5, 10, 20, etc. It’s just that the units are now “thousand pesos” instead of “pesos.”
I’m from Argentina and here it was because of inflation and devaluation, as things get more expensive low denomination bills become a problem because of how many you need so they release new ones with higher denomination, as of today anything below 100 is useless and may have more value as a relic
They had the good cents (ha) to just never deal with decimal points.
Instead of having a main unit of currency that still has to have sub-divisions, it’s just a number. There are pros and cons, but I happen to prefer whole numbers.
The yen does not have a fractional sub units like cents/pennies. So 1 yen is the smallest amount of currency. They use a system that the equivalent of it we only talked in terms of pennies/cents (a hamburger costs 800 cents, not 8 dollars). Comparing smallest unit to smallest unit, you get 1 yen = 1 Penny which sends about right
The point of a currency is to make commerce practical at any scale beyond a very small group because bartering only works if there is equivalent need. If you make boots and someone else raises chickens, you might swap if one person needs boots and the other person needs chickens. If that’s not true, now you are stuck with chickens or boots you don’t need and have to do another trade to get something you do need. For this reason, every culture, society, even video games (look up “stone of Jordan” in Diablo) ends up deciding on a thing to use as a form of currency.
For a currency to function, it has to be stable (it can’t be something that will rot or the supply will dramatically change at times), dividable (so you can do small and big transactions), limited in supply, impossible/very difficult to replicate, and universally accepted as valuable. For this reason, gold has been the defacto currency of the world for a long time.
Fiat currencies like the dollar and the yen are modestly new. I suppose you could say Romans thousands of years ago, but this was more or less the start of it. With a currency that is controlled by a government, they know they need to be careful not to increase the supply of it too quickly or people will move onto other currencies or to limit supply too much as it leads to deflation and hoarding of the currency itself.
Basically, you want a currency that slowly loses value (inflation is actually good… in moderation). You should view it as a stable thing you can use to conduct commerce, but you should see it as a bad idea to just have a vault full of it not being used as it is losing value. Money is just a tool we use to allocate goods and services in a society. It doesn’t create goods or services. Every country has been devaluing their own currencies at their own speeds for whatever reason for a long time. In periods of economic hardship, it can help goose the economy to increase supply more than normal as it encourages people to spend their money instead of hoarding it, and the money created can be used to hire people to create more goods and services. Getting an unemployed workforce working means everyone has more stuff which is really what wealth is. However this erodes the savings of people who have fixed income, pensions, and undermines the confidence in the currency itself. So, it’s a tight rope to walk.
TLDR: Every country has been running inflation independently of each other for a long time. So, that’s why the valuations are all over the map.
Something I didn’t see after a quick glance through the comments (which was admittedly pretty quick and surface level) is that some countries’ primary currencies don’t break up into other, smaller types of currency. Look at the US dollar. One dollar is one hundred cents. But the Japanese yen doesn’t break up in this way, so one yen is more like one US cent than one US dollar.
Because those numbers represent the lowest unit of their currency. In the US, 1 dollar is equal to 100 pennies. So it would be the equivalent of us having a 100 penny bill, instead of a 1 dollar bill.
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