PUBLICATIONS & REPORTS

Contents Introduction

This paper examines the currency invoicing of Japan’s exports to East Asia by applying the theory of pricing-to-market (PTM). The notable features of this paper are, first, to use a number of sample commodities obtained from the data on monthly series of H.S. code nine-digit exports, and second, to examine currency invoicing of Japanese exporters by making a distinction between the long-run and the short-run PTM under the framework of the error-correction model. Contrary to the results of the previous literature, we show that Japanese exporters of the electric machinery industry tend to stabilize the export price in terms of the U.S. dollars even in their exports to East Asia, which implies that Japan’s electric machinery exports to East Asia tend to be invoiced in U.S. dollars. Given the large presence of the electronics industry for trade and investment between Japan and East Asia, it is hard to expect the further use of the yen in trade transactions in the near future.