Goodbye, Low-Denomination Coins

By Everett Millman – Gainesville Coins ……
You’ll often hear that nothing lasts forever, and this aphorism is especially appropriate when it comes to fiat currencies. Eventually, they all become worthless.

One clear example of how inflation eats away at the purchasing power of fiat money can be seen in the inevitable demise of low-denomination coins.

Farewell To Farthings

The first coins to disappear from circulation as a result of inflation are the ones with the lowest face value. Take, for instance, the British farthing. Its denomination was one-quarter (¼) of a pence.

In the U.S., the mint once issued half pennies, but never a quarter penny. That’s essentially what a farthing was—so much so that the word came to be associated with “something essentially worthless, of no value.” Aside from making change, these coins had long outlived their usefulness.

Britain finally stopped minting farthing coins in 1956 due to their minuscule value, and officially demonetized the coins in 1960.

Such a fate may now be facing Japan’s smallest-denomination coin.

Loss Leader

Numismatic News recently reported that the Bank of Japan hasn’t minted any new ¥1 coins since 2017. In other words, zero of these coins have been issued in 2018.

While a lack of demand has something to do with this, the root cause is the incredibly small value of the one-yen coin. In terms of exchange rates, one yen is worth slightly less than one cent. It takes roughly ¥113 to equal one USD at the time of writing.

Japan wouldn’t be the first developed nation to ditch its lowest-value coin in recent years. It would follow the official elimination of one-cent coins in Australia and Canada, among others. In these countries, prices are now simply rounded to the nearest five-cent increment.

There hasn’t been any outcry from commercial interests or the general public in places where the cent was discontinued.

Another glaring reason that the Bank of Japan hasn’t issued any more ¥1 coins is because it loses money for the government. Even with an aluminum composition, each of these coins (remember: worth a single yen) still costs about ¥3 to produce.

This begs the question: Should the United States Mint follow suit? The penny also loses money—you could call it “negative seigniorage”—but the 1909 Lincoln design remains iconic in American numismatics.

Funny enough, people do tend to find other uses for coins that are no longer worth spending. Because the aluminum 1-yen weighs exactly one gram, the coin is often used as a standard weight.

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The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.