The Choice of Invoice Currency in International Trade: Implications for the Internationalization of the Yen

Hiroyuki Oi, Akira Otani and Toyoichiro Shirota
Additional contact information
Hiroyuki Oi: Institute for Monetary and Econ Studies, Bank of Japan
Akira Otani: Institute for Monetary and Econ Studies, Bank of Japan

Monetary and Economic Studies, 2004, vol. 22, issue 1, 27-63

Abstract: In this paper, we present an overview of theoretical research on the choice of an invoice currency for exports from the perspective of expected profit maximization. We then use this theory as a basis to offer a current assessment and future outlook regarding the use of the yen in trade transactions, which is one aspect of the internationalization of the yen. Our analysis demonstrates that the current use of the yen to price exports is largely consistent with levels that can be explained by theory. This suggests that the current measures for improving Japanese financial markets are, by themselves, likely to have only a limited impact on expanding the use of the yen as a denomination for trade transactions, given the current international competitiveness and market share of Japan's manufacturing industry and the current exchange rate regimes. Moreover, the currency-basket regime that has been proposed for East Asia from the perspective of the internationalization of the yen is not necessarily theoretically desirable for the region, nor is expanded use of the yen in trade transactions necessarily a free lunch for Japan, in that it may very well bring with it new problems for implementing economic policies.

JEL-codes: F23 F31 F41 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://www.imes.boj.or.jp/research/papers/english/me22-1-2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:22:y:2004:i:1:p:27-63

Access Statistics for this article

More articles in Monetary and Economic Studies from Institute for Monetary and Economic Studies, Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Kinken ().