Invoicing Currency and Exchange Rate Pass-Through in Japanese Imports: A Panel VAR Analysis

Taiyo Yoshimi, Uraku Yoshimoto, Takatoshi Ito, Kiyotaka Sato, Junko Shimizu and Yushi Yoshida

No 32910, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This study utilizes the granular Japanese customs data from 2014 to 2020 to examine the exchange rate pass-through (ERPT) to Japanese import prices. It mainly focuses on the impact of the invoicing currency choice on ERPT. The ERPT elasticity in products invoiced in the exporter’s currency is greater than those invoiced in yen. In the full sample analysis, the ERPT elasticity was 0.75 for products invoiced in the exporter’s currency, compared to about 0.19 for yen-invoiced products. We find the same tendency for imports from two Asian powerhouses: China and Thailand. There is no significant difference in the ERPT elasticity between products invoiced in the exporter’s currency and those invoiced in a third currency (i.e., a currency other than yen or the exporter’s currency). In addition, an asymmetric pass-through is found, namely the ERPT during the appreciation phase of the yen is higher than during the depreciation phase. This finding is interpreted that foreign exporters strengthen their pricing-to-market behavior during the yen depreciation phase to maintain their market share.

JEL-codes: F1 F31 F33 F39 (search for similar items in EconPapers)
Date: 2024-09
New Economics Papers: this item is included in nep-cna, nep-ifn, nep-int, nep-mon, nep-opm and nep-sea
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