Exchange Risk Management and the Choice of Invoice Currency: 2013 questionnaire survey of Japanese exporting firms

This study presents new findings regarding Japanese exporting firms' foreign exchange risk management and choice of invoice currency, based on the 2013 RIETI questionnaire survey of Japanese exporting firms. Comparing these results to that from the 2009 survey, we confirm the following. First, in exports to the world, U.S. dollar invoicing share increased from 42% to 49% while Japanese yen invoicing share decreased from 48% to 42%, and euro invoicing share also declined slightly. In addition, Asian currencies' invoicing showed a tendency to increase gradually. Second, in exports to Asia, U.S. dollar invoicing share increased while a marked increase in the use of Asian currencies was not observed. Third, the number of foreign currencies being handled increased from an average of 3.1 to 3.4, indicating that Japanese firms face more foreign exchange exposure. In summary, we confirm the invariable characteristics of Japanese firms' invoicing currency whereby they select the importer's currency for exports to advanced countries such as the United States and the eurozone, and select the U.S. dollar for trade in Asia. In other words, Japanese firms maintain their pricing-to-the-market policy in their choice of invoicing currency, and the larger the size of the firm, the stronger there is of such tendency. With the aspects of foreign exchange risk management, the larger the size of the firm, the more it utilizes hedging strategies, and there is little change in the results between 2009 and 2013.