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Unconventional Monetary Policy and its External Effects: Evidence from Japan’s Exports


  • Shin-ichi Fukuda

    (Faculty of Economics, The University of Tokyo)

  • Tsutomu Doita

    (Graduate School of Economics, The University of Tokyo)


In this paper, we explore whether unconventional monetary policy in Japan had a negative spillover effect on the rest of the world. After Prime Minister Abe advocated the new policy regime, the Japanese yen depreciated substantially which raised a concern that it would have a beggar-thy-neighbor effect in the region. However, despite the yen’s depreciation, Japan’s exports did not show significant improvement. To explain why the exports did not increase, this paper focuses on weak external demand and increased overseas production. Our theoretical model shows that a small change of the exchange rate has no effect on exports because of fixed costs when shifting the plant location across the countries. However, it also implies that a change of the exchange rate has a significant effect on the exports either when the exchange rate depreciation coincides with strong external demand or when the appreciation coincides with weak external demand. In the latter part of the paper, we examine the validity of these theoretical implications through estimating a simple export function in Japan and through calibrating our export function. In both of the experiments, we confirm that the model can track Japan’s exports reasonably well especially after the new policy regime started. --

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  • Shin-ichi Fukuda & Tsutomu Doita, 2015. "Unconventional Monetary Policy and its External Effects: Evidence from Japan’s Exports," CIRJE F-Series CIRJE-F-967, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2015cf967

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    References listed on IDEAS

    1. Thorbecke, Willem, 2014. "The contribution of the yen appreciation since 2007 to the Japanese economic debacle," Journal of the Japanese and International Economies, Elsevier, vol. 31(C), pages 1-15.
    2. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    3. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 635-654.
    4. Takashi Kano & Hiroshi Morita, 2014. "An Equilibrium Foundation of the Soros Chart," Working Papers e79, Tokyo Center for Economic Research.
    5. Jiaqian Chen & Tommaso Mancini Griffoli & Ratna Sahay, 2014. "Spillovers from United States Monetary Policy on Emerging Markets; Different This Time?," IMF Working Papers 14/240, International Monetary Fund.
    6. Mitsuyo Ando & Fukunari Kimura, 2012. "How did the Japanese Exports Respond to Two Crises in the International Production Networks? The Global Financial Crisis and the Great East Japan Earthquake," Asian Economic Journal, East Asian Economic Association, vol. 26(3), pages 261-287, September.
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