Export Experience and the Choice of Invoice Currency: Evidence from a questionnaire survey of Japanese SMEs

This study examines the determinants of invoice currency with a focus on the effect of export experience, based on a questionnaire survey of Japanese small and medium enterprises (SMEs) in the manufacturing industry. We find that exporters with extensive export experience tend to switch the invoice currency from the Japanese yen to foreign currencies. The interpretation is that export experience mitigates the exchange rate uncertainty faced by firms and enables them to use foreign currency in their exports. This effect persists even if firms intermittently export from their first exports. We also find that the yen is more likely to be chosen as the first export when the age of the exporter is higher, the sales value of the exporter is smaller, the exporter has an initiative to determine the invoice currency, and the exporter started exporting before the global financial crisis in 2007.