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The Case of Japanese Manufacturing Firms

Author

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  • Mitsuyo ANDO

    () (Keio University)

  • Akie IRIYAMA

    (State University of New York at Buffalo)

Abstract

This paper examines how international production/distribution networks provide individual firms with exporting/importing responsiveness to exchange rate movements. With the micro-data of Japanese manufacturing firms from 1994 to 2004, we find that firms' exports tend to respond to exchange rate movements, in particular (1) when firms are large in size, (2) when majority-owned affiliates are dominant among their foreign affiliates, and (3) when their intra-firm trade ratio is moderately high. Furthermore, these tendencies are more salient for machinery firms, one of the major players in international production networks in East Asia. The results suggest that Japanese manufacturing firms, particularly machinery firms, with greater foreign operations under their own corporate control would better absorb shocks of exchange rate movements by adjusting intra-firm transactions more significantly. We do not find such tendencies for imports, however. The study provides implications for international production networks, which have developed drastically in East Asia.

Suggested Citation

  • Mitsuyo ANDO & Akie IRIYAMA, 2009. "The Case of Japanese Manufacturing Firms," Working Papers d012, Economic Research Institute for ASEAN and East Asia (ERIA).
  • Handle: RePEc:era:wpaper:d012
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    File URL: http://www.eria.org/ERIA-DP-2009-09.pdf
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    More about this item

    Keywords

    International production networks; Trade; Exchange rates; Japanese MNEs.;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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