The Japanese Yen and US Dollar Exchange Rate during Post-World War II

In 1946, the exchange rate between the Japanese yen and the US dollar experienced significant fluctuations due to the aftermath of World War II and Japan's economic challenges. Under the Allied Occupation, the official exchange rate was fixed at approximately 360 yen to one US dollar, a rate that persisted well into the 1970s until the yen eventually adopted a floating exchange rate.

Fixing the Exchange Rate

The fixed exchange rate of 360 yen to one US dollar was established as part of the post-World War II economic reforms. This rate aimed to stabilize the Japanese economy and control inflation. The Bretton Woods system, which fixed exchange rates, remained in place until the early 1970s when the yen was allowed to float.

The Japanese Yen and Post-War Economic Challenges

Following the war, Japan faced unprecedented economic hardship, including severe food shortages. This situation led to the introduction of rationing cards and books as the primary form of payment. The food crisis was so severe that the American occupation forces initiated school lunches for children, providing 600 calories and 25 grams of protein in an effort to combat massive child malnutrition and child starvation.

The black market played a significant role in the economy during this period. Soba noodles were the most sought-after product, and the US dollar was the preferred currency. Some black marketeers accepted Japanese yen, implying an exchange rate of approximately 350 to 400 yen to one US dollar.

Transition to Bretton Woods

After the Americans withdrew from Japan in 1952, they aimed to bring Japan into the international economic system by reintroducing the Japanese yen into the Bretton Woods structure. The customary rate of 360 yen to one US dollar was selected and officially fixed under the Bretton Woods system from 1949 until 1971.

In 1971, US President Nixon announced the end of the Bretton Woods system, withdrawing the US dollar from its fixed exchange rate with gold. This marked the transition to the current era of floating exchange rates, leaving Japan's yen to fluctuate according to market forces.

Conclusion

The exchange rates between the Japanese yen and the US dollar in 1946 were significantly influenced by the post-war economic and social landscape of Japan. The fixed exchange rate, which persisted until the early 1970s, played a crucial role in stabilizing the Japanese economy and integrating it into the global financial system.

References

[1] World War II and its Economic Aftermath in Japan. Mark J. H. Rowland. (1997)

[2] The Transition from Fixed to Floating Exchange Rates: The Experience of Japan. Eric Lombardi. (1992)