Invoicing Currency Choice: Strategic Complementarities and Currency Matching

Japanese exporters’ choice of invoice currencies is investigated using newly available official Customs declaration data, which records detailed information, including the trading partners’ names, invoicing currency, and product descriptions. The strategic complementarity mechanism, that is, choosing the same invoice currency as others in the same industry or the same destination market, is found among Japanese exporters. We propose the “broad two-way exporters” whose export destinations and import origins do not necessarily match and the “narrow two-way exporters” whose export destination and import origins match in the same year. It is found that currency matching for exports and imports is as essential as strategic complementarity for two-way exporters, regardless of dominant currency, producer currency, or local currency invoicing. However, as one of this paper’s novelty, we found evidence that newly entering two-way exporters are less concerned about currency matching. Therefore, the currency matching mechanism for two-way exporters is gradually formed as they continue to survive in international markets.