How did some currencies come to operate in the hundreds or thousands?

Question

For instance the Japanese 100 yen converts to just 1 Australian dollar.

In: Economics

Answer 1

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.”