 How Japanese firms can weather endaka periods: Evidence from the transportation equipment industryJapan and the World Economy, 2020, vol. 56, issue C Abstract: Japan has experienced several appreciation episodes. These appreciations may squeeze profit margins and lower export volumes. This paper investigates whether firms can weather appreciation periods by producing differentiated rather than commoditized products. To do this it investigates different sectors within the Japanese transportation equipment industry. Results from estimating pricing-to-market (PTM) coefficients indicate that firms producing differentiated products can pass-through more of exchange rate appreciations into higher foreign currency prices and thus better preserve their profit margins. Results from estimating trade elasticities are consistent with the PTM results and indicate that the automobile industry has exported much less than predicted after the yen depreciated in 2012. Finally, estimates of the stock market exposure across sectors indicates that the profitability of firms producing differentiated products is less exposed to appreciations. Producing differentiated, knowledge-intensive goods can thus help firms to survive endaka periods. Keywords: Differentiated products; Exchange rate pass-through; Exchange rate elasticities (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:56:y:2020:i:c:s0922142520300360 DOI: 10.1016/j.japwor.2020.101035 Access Statistics for this article Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao More articles in Japan and the World Economy from Elsevier |
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