Penny-wise or 2.4 cents foolish?? The Japanese Yen, their smallest denomination coin almost directly akin and valued as the American penny, may suffer a shared fate. And rightfully so!
The American debate over the fate of our penny continues to rage, not so much with the average American, who rather strongly supports pulling pennies from circulation, but within the United States government over whether the American one-cent coin should be eliminated as a unit of currency. In fact, two bills have been introduced in Congress that would cease production of pennies, but neither bill has been approved. In early 2013, even President Obama stated his willingness to discard the penny.
But why consider revamping a long-lived and somewhat loved currency system? Depending on the source you use, each zinc and copper penny in the states costs from 1.6 (to produce), or up to 2.4 cents (to produce and distribute). Economically speaking, it’s officially SILLY to mint coins which cost more than they are worth! Pennies also drain our money in circulation as they are squirreled away in drawers and jars, on the order of $60.2 million in fiscal year 2011. In their defense, though, the penny is not the only American coin that costs more than it’s worth. Nickels cost 11.18 cents to produce and distribute, and over $56.5 million in nickels disappeared from circulation in 2011.
But what about the “yennie” in Japan? Japan remains in love with their 1-yen coin. Sure, the rest of the developed world (sans the US of A) continues its divorce from their respective smallest denomination coins for convenience sake and economic pragmatism (i.e., their drastic decline in purchasing power over the last 30 years). But for many Japanese, the fake-looking and cheaper-feeling aluminum of the one-yen coin serves as the philosophical base of Japan’s economy, making it emotionally hard for them to let go. In fact, the one-yen coin is the most pure of the Japanese coins, being “one,” made of 100% aluminum, and weighing (by law) exactly 1 gram. The Japanese are known to calibrate weight scales using saved yennies!
The rational solution is easy to implement and to understand, and has been proven as a widely accepted method of ridding a 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: do away with these dinosaurs of a different era.
Canada has had a one-cent coin of similar size and color as its American counterpart. Nearly identical in composition, look, and feel, they even circulate at par value in small quantities in the United States (and vice-versa). In a bold move in a country where the government actually seems to function at times, in 2012 the Canadian government announced that it will eliminate the penny from the Canadian coinage system. The final Canadian penny was minted on 4 May 2012, followed in 2013 by the end of distribution. Businesses in our northern neighbor simply round cash transactions to the nearest five-cent increment, but checks and transactions using electronic payments remain executed at full penny-based value.
There are many other precedents. In the last 35 years, a number of countries, including Australia, Hungary, Singapore, Hong Kong, Israel, New Zealand, Brazil, Finland, the Netherlands, Mexico, Britain, Norway, Sweden, Switzerland and Britain, have already dropped their lowest-denominated coins, without dire consequences.
But the 1 yen coin in Japan seems to have a somewhat sacred presence. Alongside the emotional attachment to the 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 rise to 10%, 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 all the same reasons as everywhere else in the world, the 1 yen coin costs about 1.6-.18 yen to produce. Sound familiar?!
But there’s even a precedent in Japan as well: the sen. A single sen is 1/100th of a yen, and used to be minted in Japan as currency until 1953 when inflation made it, well, valueless. It was rightfully discarded.
America has tried. In 1990, a bill entitled the Price Rounding Act of 1989 (HR 3761) was introduced that would eliminate the penny in cash transactions, requiring rounding to the nearest nickel. In 2001, another bill called the Legal Tender Modernization Act of 2001 (HR 2528) failed, and in 2006 yet another bill, the Currency Overhaul for an Industrious Nation (COIN) Act (HR 5818) likewise failed to pass into law. The bills received overwhelming popular support from the public, but in truly American fashion, our “Representatives” chose to back party-politics and self-preservation concerns over actually conducting the business of the Nation by the people, for the people. The only thing Congress has directed our National mint to do is to “study” ways to produce and distribute the penny in less expensive ways….
Now we don’t have to outright ban pennies. We just need to stop producing them, distributing them as an official part of our currency, and give the consumer choice at the register to pay electrically to the nearest cent…or pay cash for a price rounded to the nearest 5 cents. Some people are very attached to pennies, and currency has always served as a primary means of establishing and showing off sovereignty. And besides, as (our grandparents) say, “…a penny saved is a penny earned.” Likewise, electronic transactions would continue to include cents, exactly because there’s no physical exchange of little metal round thingies.
People and businesses in both American and Japan are taking matters into their own hands. The ever popular discount retail store, Don Quijote (ドン・キホーテ) has for the last decade or so have provided a sizeable box of one-yen coins at each of their cash registers, and encourage customers to use up to 4 of them with every transaction, effectively eliminating the need for single yen change. Interesting enough, this aspect of their business model is based on decreasing transaction time at checkout, while circumventing the aggravating (and time-consuming) fumble for yennies in purses, pockets, and wallets. It’s a brilliant and successful idea, and I’m not sure why more businesses haven’t adopted such a convention.
Now, you can argue (and many have), that inflation results whenever small coins are phased out. While some prices will be rounded down, companies can (and probably would) adjust prices so that most roundings would be to their benefit. In other words, instead of selling a cup of joe for $5.02, a crime in and of itself, coffee shops would bump the price to $5.03 or $5.04, which then would result in a price of $5.05 in cash transactions, a net gain of three cents per cup! This could, in essence, cause a small, one-time inflation burst, but it would be really quite painless, especially when we stop and consider the drastic spikes in quality of life that would result: women won’t be digging through their change purses quite so long, and men’s pants pockets’ metallic burdens will be significantly lightened, to the point (maybe) where men would actually use change in case transactions. And you thought the Y chromosome came with a penny allergy…. The fact is, over time, there would be no real NET EFFECT on prices.
At U.S. Military bases overseas, the US military’s affiliated stores and commissaries all round transactions up or down to the nearest 5 cent denomination. It works exceedingly well, and I have yet to hear a complaint over unfairness or inflation. So, when, if ever, is the United States and Japan going to bring their dollars and sense squarely into this Century??
Or, think about it another way in terms of real life. “Pennies take up too much space on our dressers at home,” Jim Flaherty, the Canadian finance minister, said in characterizing Canada’s decision to eliminate the penny. A government-sanctioned informative brochure put it this way: “We often store them in jars, throw them away in water fountains, or refuse them as change.” True enough.
Do we really need pennies? And by extension, does Japan really still need the “yennie”?
A penny…or yennie…for your thoughts?