Exchange Risk Management and the Choice of Invoice Currency: 2014 Questionnaire Survey of Japanese Overseas Subsidiaries

This study presents new findings of Japanese overseas subsidiaries' foreign exchange risk management and the choice of invoice currency, based on the 2014 RIETI Questionnaire Survey of Japanese Overseas Subsidiaries. First, 60% of Japanese subsidiaries conducted exchange risk management and chose the invoice currency on a discretionary basis. Second, Japanese subsidiaries increased U.S. dollar invoicing transactions, and a marked increase in the use of Asian currencies was not observed. Third, the effect of exchange rate changes on the subsidiaries' pricing behavior differed between the yen appreciation and depreciation periods. Fourth, Japanese subsidiaries reduced the use of the yen in trade with Japan in recent years. Only Japanese subsidiaries in China increased the share of renminbi invoicing trade, and subsidiaries in other Asian economies seldom chose renminbi invoicing in external trade, except for their trade with China.