Invoice Currency Choice and its Determinants in Japanese Trade: New Evidence from Japanese Customs Data

Shimizu Junko, Kiyotaka Sato, Takatoshi Ito, Yushi Yoshida, Taiyo Yoshimi and Uraku Yoshimoto
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Shimizu Junko: Faculty of Economics, Gakushuin University, Japan / Policy Research Institute, Ministry of Finance, Japan
Kiyotaka Sato: Department of Economics, Yokohama National University, Japan / Policy Research Institute, Ministry of Finance, Japan
Takatoshi Ito: School of International and Public Affairs, Columbia University, USA / NBER / National Graduate Institute for Policy Studies, Japan
Taiyo Yoshimi: DFaculty of Economics, Chuo University, Japan / Policy Research Institute,Ministry of Finance, Japan
Uraku Yoshimoto: Policy Research Institute, Ministry of Finance, Japan

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: In this study, we use microdata from Japanese customs declarations and calculate semiannual invoice currency shares by country, both on a value and transaction basis. From country-level data,we can confirm the following: First, the impression that Japan’s trade is biased toward the U.S. dollar (USD) is mainly due to choices in the U.S., China, and resource-rich countries with large trade volumes. Second, the yen invoicing is selected on a value basis and an even larger transaction number basis, and the local currency invoicing is also used on a bilateral country basis. Third, the choice of invoice currency has changed in recent years. From 2014 to 2020, the USD lost the most shares, falling in 23 of the 34 countries. By conducting an empirical analysis exploring the determinants of invoice currency, our main findings confirm that the intermediate goods trade share has the effect of reducing Yen and increasing USD invoicing in export, while the higher the inflation gap, the more likely one is to use USD invoicing, which suggests that Japanese firms will be further exposed to foreign exchange risk in the future.

Keywords: Invoice currency share; Customs data; Trading partner (search for similar items in EconPapers)
JEL-codes: F23 F31 F33 (search for similar items in EconPapers)
Pages: 33 pages
New Economics Papers: this item is included in nep-int, nep-mon and nep-opm
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https://www.mof.go.jp/pri/research/discussion_paper/ron374.pdf First version, 2016 (application/pdf)

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