Choice of Invoice Currency in Japanese Trade: Industry and commodity level analysis

Author Name ITO Takatoshi (Program Director, RIETI) / KOIBUCHI Satoshi (Chuo University) / SATO Kiyotaka (Yokohama National University) / SHIMIZU Junko (Gakushuin University)
Creation Date/NO. March 2016 16-E-031
Research Project Research on Exchange Rate Pass-Through
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This paper develops the estimation method of the choice of invoice currency at a detailed commodity level by using the export and import price indices published by the Bank of Japan (BOJ). The new evidence is presented on the industry and commodity level differences of the invoice currency choice from 2000 to 2015. It is found that highly differentiated products such as production machinery equipment tend to be invoiced in yen in Japanese exports. While the recent increase in Japanese imports of electronics products has likely increased the share of yen-invoiced imports, the share of U.S. dollar invoicing is larger than that of yen invoicing. Despite growing economic interdependence between Japan and Asia, the U.S. dollar is still a dominant invoice currency in Japanese trade.