|Ancient Chinese "cash" coin|
Americans, when asked about coins with holes in them, probably picture the old Chinese "cash" coins which are featured so prominently in Chinese-style decor. These coins had a square-shaped hole in the center, with Chinese characters around it. The United States has never had a coin with a hole in it, so it's not something we're used to seeing. Plenty of other countries, however, have had one or more of this type of coin (known as "holed coins" or "holey coins") in their recent history.
As far as I know, the holes put into modern foreign coins don't serve any specific purpose. They are not there to make the coins work in a particular machine, or to be easier to carry (although they would be slightly lighter than a coin without a hole). The main reason that you would make a modern coin with a hole in it (or, for that matter, with an unusual shape), besides pure decoration, is to make it more easily distinguishable (by touch and sight) from other coins in circulation.
(Putting a hole in a coin would also use less metal, which may be important when metal is needed for other uses (such as during a long war). However, coins are usually made out of the most common and least expensive metals possible (you don't want to make a $1 coin that uses $2 in metal) so I'm not aware of any examples of a country putting a hole in their coins for this reason.)
|Coin from India with a large hole|
|Coins with holes drilled in to them|
to make jewelry
|Japan 5-yen (left) and 50-yen (right) coins|
Besides Japan, many countries in Africa, Asia, Europe, and the Middle East have used coins with holes in the recent past, and you might be surprised by who they are. Spain added a hole to their 25-peseta coin in 1990 and kept it until switching to the euro in 2002. Hungary had a hole in their 2-filler coin, used from 1950 until 1992. Greece had holes in their 5-, 10-, and 20-lepta coins from the 1950s until the 1970s. Fiji had holes in their half-penny and penny in the 1930s through the 1950s.
Here is a list of the countries that I've found that have circulated coins with holes since 1900. This is definitely not a complete list, so I will update it when I find out about other countries. And since I bet that you readers know of examples that I haven't listed, I'm going to turn on blog comments this month - so post any countries that are missing from this list (list specific denominations and years if you can).
Countries which have had a coin with a hole since 1900:
British West Africa
Papua New Guinea
Looking for coins with holes to add to your collection?
Check out our Coins With Holes Set.
Update 1/22/2012: Added East Africa, Nepal, and Philippines
Update 3/20/2012: Added Papua New Guinea
Update 4/21/2012: Added Turkey
Update 5/14/2012: Added Nigeria
Update 7/22/2012: Added Zambia, Belgian Congo, British West Africa, Congo, French Indochina, and Poland
Update 12/9/2012: Added Greenland, Mongolia, Morocco, Netherlands, New Guinea, and Palestine