First minted in 1869, after the Meiji Restoration, the yen was officially adopted as the basic unit in the monetary reform of 1871. In that year the government suspended the exchange of clan notes, paper money that feudal lords had issued and circulated since the late 16th century. (According to a Ministry of Finance survey of 1868, a total of 1,694 denominations of clan money had been issued by 244 clans, 14 magistrates' offices, and 9 shogunate retainers during the Tokugawa (Tokugawa period) period 【1603–1867】.) By 1879 the replacement of clan notes by the yen-based government notes had been completed.

The Bank of Japan has the exclusive authority to issue banknotes and coins. Banknotes are issued in denominations ranging from 1,000 to 10,000 yen. The obverse of each note contains an image of an important cultural figure in Japanese history. For example, novelist Natsume Sōseki (1867–1916) appears on the 1,000-yen note; author Murasaki Shikibu (c. 978–c. 1014), whose Genji monogatari (The Tale of Genji (Tale of Genji, The)) is considered one of the world's oldest novels, is on the 2,000-yen note; and author and educator Fukuzawa Yukichi (1835–1901), who was one of the most powerful nongovernmental figures in Japan, is featured on the 10,000-yen note. Coin denominations range from 1 to 500 yen.