The Effect of Exchange Rate Changes on Japanese Consumption Exports

Willem Thorbecke, Atsuyuki Kato
JEL codes: 
ADBI Working Paper Series

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