10000 Yen – Japan

In 1997, Japan's currency situation was dominated by the prolonged struggle of the yen (JPY) and the broader context of the Asian Financial Crisis. The yen had experienced extreme volatility earlier in the decade, reaching a post-war high of 79 to the US dollar in 1995, which severely damaged export competitiveness. By 1997, the currency had weakened to a range of 115-130 yen per dollar, a level more palatable to the nation's vital export sector. However, this relative stability was precarious, set against a backdrop of domestic banking fragility and a stagnant economy still grappling with the aftermath of the asset price bubble's collapse.

The year's pivotal event was the outbreak of the Asian Financial Crisis, which began in Thailand in July and quickly spread to neighboring economies. Initially, this crisis caused a "flight to quality," strengthening the yen as investors pulled capital from Southeast Asia and sought perceived safety in Japanese assets. However, as the crisis deepened and exposed Japan's own significant exposure to troubled Asian economies through bank loans and direct investment, sentiment shifted. By the fourth quarter, fears over the stability of Japan's financial system intensified following the high-profile failures of several major financial institutions, including Yamaichi Securities and Hokkaido Takushoku Bank. This domestic crisis triggered a sharp, rapid depreciation of the yen, pushing it toward 130 per dollar.

The Japanese government and the Bank of Japan (BOJ) faced a complex policy dilemma. A weaker yen helped exporters but raised import costs and risked destabilizing regional currencies further. While the BOJ maintained low interest rates to support the fragile domestic economy, it also engaged in unilateral and coordinated intervention with the US Treasury in mid-1997 to support the yen and stabilize currency markets. Ultimately, 1997 was a year where external regional turmoil and profound internal financial weakness converged, making the yen's value a volatile barometer of both Japan's economic vulnerabilities and its role as a regional financial anchor.