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The Structural Determinants of Invoice Currencies in Japan: The Case of Foreign Trades with East Asian Countries

  • Shin-ichi Fukuda

This paper investigates why invoice rations of the Japanese yen are relatively low for Japan's foreign trades. The first part of the paper investigates the determinants of invoice currencies in Japan's exports with East Asian countries. Focusing on the heavy reliance of Japan's exports on the United States, we show that "pricing-to-market"(PTM) behavior of Japanese exporters may explain the choice of invoice currency by Japanese exports well. The second part of the paper considers other structural determinants of the invoice currencies. In the analysis, we focus on invoice currency rations in Japan's imports and on the relation between invoice ratios and the trade dependency. We show that low yen-invoiced rations are mainly caused by the large shares of oil and raw materials in Japan's imports. We also show that recent changes in Japan's invoice currency ratios are due to the changing trade dependency to the United States.

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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Discussion Paper Series with number a307.

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Date of creation: Mar 1995
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Handle: RePEc:hit:hituec:a307
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  1. McKinnon, Ronald I., 1979. "Money in International Exchange: The Convertible Currency System," OUP Catalogue, Oxford University Press, number 9780195024098, December.
  2. Gary R. Saxonhouse, 1993. "Pricing Strategies and Trading Blocs in East Asia," NBER Chapters, in: Regionalism and Rivalry: Japan and the United States in Pacific Asia, pages 89-124 National Bureau of Economic Research, Inc.
  3. Paul R. Krugman, 1979. "Vehicle Currencies And the Structure Of International Exchange," NBER Working Papers 0333, National Bureau of Economic Research, Inc.
  4. Kenichi Ohno, 1989. "Export Pricing Behavior of Manufacturing: A U.S.: Japan Comparison," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 550-579, September.
  5. Giovannini, Alberto, 1988. "Exchange rates and traded goods prices," Journal of International Economics, Elsevier, vol. 24(1-2), pages 45-68, February.
  6. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
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