Investigating Japan’s Machinery and Equipment Exports after the Global Financial Crisis

Japan exports sophisticated capital goods. Since the Global Financial Crisis (GFC) Japanese companies have offshored the production of lower-end goods and parts and components to Asian countries. Because of this, Sato and Shimizu (2015) argued that a weaker yen no longer stimulates machinery exports as much because an increase in Japanese exports increases parts and components imports from overseas Asian subsidiaries. This paper finds that, after the GFC, a weaker yen no longer increases Japanese machinery exports to Asia but continues to stimulate exports outside of Asia. It also finds that, independent of its impact on exports, a weaker yen increases stock prices for many Japanese machinery producers. Thus the weaker yen since 2020 does not help Asian firms to import vital Japanese capital goods but does increase the profitability of Japanese manufacturers and their exports to non-Asian countries.