Exports and Foreign Sales of Multinational Firms: Analysis of simultaneous equations (Japanese)

Foreign production and sales of Japanese multinational firms are factors that may have impeded the recovery of Japanese exports experienced since 2010 after the world financial crisis. By applying the two-stage least squares method for the matched panel data of the Basic Survey of Japanese Business Structure and Activities, Survey of Overseas Business Activities, and Census of Manufacture and Economic Census for Business Activity from 2000 to 2012, this paper estimates two gravity equations for exports and foreign sales of Japanese manufacturing multinational firms simultaneously and analyzes what has caused Japanese exports to fall in the 2010s. The result of the estimation indicates exports are affected positively by foreign sales and negatively by foreign markets and exchange rates while foreign sales are affected positively by exports and foreign markets and negatively by exchange rates. The result implies that inactive foreign sales of multinational firms as well as appreciation of the Japanese yen and recovery of foreign markets have induced the stagnation of Japanese exports in the 2010s.