This paper examines the relationship between monetary indicators and the Japanese yen since 1974. Our study provides supportive evidence of monetary variables explaining long-run exchange rates. However, our data show the asymmetric effects of Japanese and US monetary indicators on the yen. While Japanese indicators did not have persistent effects on the yen, US variables did. In contrast, Japanese data are found to explain short-run dynamics. Our results, therefore, provide evidence that it may be more prudent for Japanese policymakers to pay close attention to short-term developments in the yen.