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The Short- and Long-Run Effects of Exchange Rate Changes on the Japanese Electronics Industry

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  • THORBECKE, Willem

Abstract

The value of Japanese electronics exports has tumbled since the advent of the Global Financial Crisis, largely because export prices have fallen. This paper presents evidence that the appreciation of the yen between 2007 and 2011 caused yen export prices for electronics goods to fall by more than 20%. Yen export prices fell much more then yen costs over this period, implying that profit margins have been squeezed. This paper also reports that, in the long run, a 10% appreciation of the yen will reduce the volume of electronics exports by 10%. Japanese firms could mitigate the adverse impact of the strong yen by producing innovative products rather than competing based on price in commoditized industries.

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File URL: http://www.rieti.go.jp/jp/publications/dp/12e019.pdf
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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 12019.

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Length: 34 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:eti:dpaper:12019

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References

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  1. Thomas Klitgaard, 1999. "Exchange rates and profit margins: the case of Japanese exporters," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 41-54.
  2. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc.
  3. Thorbecke, Willem & Komoto, Ginalyn, 2010. "Investigating the Effect of Exchange Rate Changes on Transpacific Rebalancing," ADBI Working Papers 247, Asian Development Bank Institute.
  4. Willem THORBECKE, 2012. "Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters," Discussion papers 12003, Research Institute of Economy, Trade and Industry (RIETI).
  5. Petri, Peter A. & Plummer, Michael G., 2009. "The triad in crisis: What we learned and how it will change global cooperation," Journal of Asian Economics, Elsevier, vol. 20(6), pages 700-713, November.
  6. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
  7. Ceglowski, Janet, 2010. "Has pass-through to export prices risen? Evidence for Japan," Journal of the Japanese and International Economies, Elsevier, vol. 24(1), pages 86-98, March.
  8. Prema-chandra Athukorala, 2011. "Growing with Global Production Sharing: The Tale of Penang Export Hub," Departmental Working Papers 2011-13, The Australian National University, Arndt-Corden Department of Economics.
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Cited by:
  1. Thorbecke, Willem, 2014. "The contribution of the yen appreciation since 2007 to the Japanese economic debacle," Journal of the Japanese and International Economies, Elsevier, vol. 31(C), pages 1-15.
  2. Aiello, Francesco & Bonanno, Graziella & Via, Alessia, 2014. "Do export price elasticities support tensions in currency markets? Evidence from China and six OECD countries," MPRA Paper 56727, University Library of Munich, Germany.

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