As one of the new surveillance criteria in Asia, we created the Asian Monetary Unit (AMU) and have published AMU data and the AMU Deviation Indicators on the RIETI website since 2005. Monitoring the movements of each Asian currency has become important not only against the U.S. dollar but also against a weighted average of the regional currencies in Asia, as Asian economies are closely related and compete against each other. In addition, as the Japanese yen appreciated substantially against the U.S. dollar and other major currencies following the Lehman shock in September 2008, it has become increasingly important to watch daily fluctuations of the Japanese yen, not only at the effective base but also by industry. We calculate the daily NEER of the Japanese yen for each of eight major manufacturing industries, which provides a better indicator to reflect differences in international competitiveness across industries compared with the conventional NEER that offers no industry breakdown.

The choice of the trading partner countries

A "major trading partner country" represents a country that made up one percent or more of Japan's total exports at least once during the period from 1997 to 2009. While 37 export destination countries are listed in Table 1, it must be noted that the number of major trading partner countries differs across industries.

Weighting Scheme

In calculating the daily NEER for each industry, we compute the share of each major trading partner country for each year, assuming that the sum of exports to major trading partner countries is equal to Japan's total exports. The share is based on the last three-year average of Japanese exports data and is revised every year once the latest data becomes available.

Industrial Classifications

To calculate the daily NEER, we collect 1,932 export commodities at the HS9-digit level for each destination and these commodities are classified into the following eight industries (Table 2), based on the Basis Classification Index for the Summary Report on Trade of Japan. Table 3 shows an example of the three-year average export share from 2007 to 2009 by industry and by destination country.

Calculation of the NEER

Following the calculation methodology of the Bank of Japan, the NEERs are constructed as chain-linked indices for each industry. The NEER of industry j in m-day of year t (NEER_j,t,m) is represented as follows:

where E^t-1_j,t,1 represents the rate of change in the effective exchange rate of industry j from the first sample of year t-1 to the first sample of year t, which is computed by using the export weights of year t. E^t_j,t,m is the rate of change in the effective exchange rate of industry j from the first sample of year t to the m-day of year t, which is calculated by using the export weights of the year t. Thus, the formula for E^t_j,t,m is given by the following geometric mean.

where ER_i,t,m is the nominal exchange rate of country i vis-à-vis the Japanese yen in m-day of year t.
W_i,j,t is the industry j's weight of exports to country i in year t.

The chart below shows the flow of calculating the Japanese NEER by industry.

The benchmark of the NEER

The benchmark period of the NEER is the first day of January 2000 (i.e., January 4, 2000 = 100).

Last update: May 23, 2012

Daily data of the nominal effectove exchange rate by industry [CSV:208KB]