THE FATE OF 1 YEN COIN , LIKE OTHER LOWER DENOMINATIONS

THE FATE OF THE 1 YEN COIN – WHEN WILL IT LOSE ITS LUSTRE IN JAPAN?

Next time you are having lunch with your Japanese colleagues, and have one of those awkward moments where no-one has a good topic to tide over until the food arrives, try asking them their thoughts on the 1 yen coin. Half of the Japanese will never really gave it any thought (i.e. they could never think of not having it), and the other half will tell you that “you can’t just not make the one yen coin”. Dig a little deeper, and ask them why? It is here where you find deeply ingrained, and somewhat unfounded Nihonjin-ness come out – Japan is still mero-mero in love with their yen, and bringing up its abolishment brings gains us a little more insight into just how close the Japanese individuals are in their way of thinking when it comes to matters close to home (read this anecdote if you read Japanese, it expresses the sentiment of many people in Japan towards the 1 yen coin).

While the rest of the developed world (apart from the USA – still shadowed by the imperial system) moves away from their smallest denominations for convenience sake and because of their drastic decline in purchasing power over the last 30 years, for many Japanese people, the silvery pika-pika aluminium of the 1 yen coin and its nature as the base of Japan’s currency and economy make it hard for them to let go. In some ways it is the most pure of the Japanese coins (it is “one”, and 100% aluminium), and despite mentally groaning about it when they fiddle in their purses, people still surprisingly love to use it. 99 yen stores, and in general prices ending with 98 and 99 JPY are still incredibly common, even in retail stores where the majority of the transactions could be expected in cash, and customers will without fail diligently wait for their 1-2 yen change to be handed back over the counter, even if it means waiting for the cashier to fumble and break out a roll of new coins.

Australia, Brazil, Finland, Israel, Holland, New Zealand, Norway, Sweden, Switzerland, and England have all abolished at least their smallest denomination in the last 20 years (several had 2 cent equivalent coins, which have gone as well). The latest country to be left penniless (literally!) is Canada, and as the most recent example of permanent cessation of production of the smallest denomination, it is interesting to look at some of the reasons given by their legislators when they announced their decision on March 29th 2012.

Indeed, the purchasing power of the Canadian penny now has less than 1/20th of when it was first produced. The recent announcement described the penny as a “burden to the economy”, actually costing 1.6 cents to make one of them! The pamphlet outlining the change to the public reveals that the government is losing $11 million a year just on production costs, and that is not including the wasted time and frustration of those who have to use it, and count it in business transactions and banks all over the country. The estimated total burden for keeping the penny in Canada is now in excess of $150 million.

The rational solution is easy (to implement and to understand by the public), and has been proven (see above) as a widely accepted method of ridding the country of the production and management overheads and the burden on the economy – not to mention the teeth-clenching hair-pulling frustration that it gives consumers, businesses and banks alike.

So, how is this being dealt with in Japan? Well.. It isn’t really. The 1 yen coin seems to have a somewhat sacred presence here. That’s not to say that people dont complain about it – they dont hold back any monku on that. But just as a wife complains about her husband (or their 35 year old son who still lives at home), and just as he is still loved (tolerated?), the Japanese society keeps clinging to their beloved 1 yen coin and seemingly dread the day that it will walk out the door.

Alongside the emotional attachment to the 1 yen coin, there are other potentially stronger factors that could yet lead to its demise, more quickly than people may realize. In 1997, when Japan raised consumption tax to an easier and more rounded number (5%), the actual demand for 1 yen coins decreased overnight. With the expected rise to 10% in the coming years, and the further proliferation of denshi-money (eMoney/cashless transactions), demand is expected to drop to all time lows. In fact, in 2011, for the first time in 43 years since the first minting of the current design, the Mint of Japan didn’t even produce a single 1 yen coin for general circulation. And, for good reasons..

The 1 yen coin costs far more than 1 yen to produce. In fact, it costs between 1.6 and 1.8 yen, nearly double the face value to produce one of those little buggers. Even so, there have always been, and still are far more 1 yen coins produced than any other coin! The aluminium in each coin alone costs around 0.7 yen, and the rest of the cost is for production and distribution. Mitsubishi UFJ Research and Consulting reported in a 2003 analysis that producing a 1 yen coin created a 13 yen overall loss for Japan!

Keeping the coin in circulation by changing its size and/or material to something cheaper is out of the question for now as well, as there is a law that sets the weight and size of all coins in Japan. Interestingly, the 1 yen coin is exactly 1 gram in weight, and made of pure aluminium, per law. Hence, even today many people save their pennies (yennies?) as a convenient way to calibrate their weight measurement scales at home.

The ever popular discount retail store, Don Quijote (ドン・キホーテ) has for the last 10 or more years taken matters of dealing with the stress of 1 yen coins into their own hands. They have a box of them at every cash register, and basically allow customers to use up to 4 of them with every transaction, effectively eliminating the need for customers to receive 1 yen coins ever in their change, or fumble for them in their wallet. It is brilliant, both service and marketing wise, and it is hard to fathom why more businesses haven’t cottoned on to this idea.

What do you think… will the yen, go the same way as the sen did, way back in 1953? (A sen is 1/100th of a Yen, and used to be minted in Japan as currency). What will it take for the Japanese people to realize that almost the whole developed world (except the USA) has deemed it necessary to get rid of this burden on society?