The Effect of Exchange Rate Changes on Japanese Consumption Exports

This paper investigates how exchange rates affect Japanese exports. This is difficult
because many of Japan’s exports are used to produce goods for re-export. An appreciation
in the importing country that decreases exports can decrease its imported inputs from Japan.
To correct for this bias we examine consumption exports. Using a panel dataset of Japan’s
consumption exports to 17 countries over the 1988–2009 period, we find that a 10%
appreciation of the yen would reduce Japan’s consumption goods exports by 9%. These
results indicate that the large swings in the value of the yen over the last decade have
caused large swings in the volume of Japanese exports