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

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  • Shin-ichi Fukuda

Abstract

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.

Suggested Citation

  • Shin-ichi Fukuda, 1995. "The Structural Determinants of Invoice Currencies in Japan: The Case of Foreign Trades with East Asian Countries," Discussion Paper Series a307, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hituec:a307
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    References listed on IDEAS

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    1. Krugman, Paul, 1980. "Vehicle Currencies and the Structure of International Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 513-526, August.
    2. Giovannini, Alberto, 1988. "Exchange rates and traded goods prices," Journal of International Economics, Elsevier, vol. 24(1-2), pages 45-68, February.
    3. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    4. McKinnon, Ronald I., 1979. "Money in International Exchange: The Convertible Currency System," OUP Catalogue, Oxford University Press, number 9780195024098.
    5. 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.
    6. 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.
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    Cited by:

    1. Fukuda, Shin-ichi & Ono, Masanori, 2006. "On the determinants of exporters' currency pricing: History vs. expectations," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 548-568, December.
    2. Chow, Hwee Kwan & Kim, Yoonbai, 2003. "A common currency peg in East Asia? Perspectives from Western Europe," Journal of Macroeconomics, Elsevier, vol. 25(3), pages 331-350, September.
    3. Tse, Y. K. & Ng, L. K., 1997. "The cointegration of Asian currencies revisited," Japan and the World Economy, Elsevier, vol. 9(1), pages 109-114, March.

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