Speaker:

Professor Kiyotaka Sato
Department of Economics
Yokohama National University

Date & Time:

Wednesday, 9 July 2025
3:00 pm – 4:30 pm (Singapore Time)

Venue:

Online via Zoom

Registration is required:

https://nus-sg.zoom.us/webinar/register/WN_JKT97_I_QhmQs_M8toj2AQ

Synopsis:

Amid renewed concerns over the US dollar’s dominance and the Trump 2.0 reciprocal tariffs, Japan is often cited as highly dependent on dollar-based trade.  Ministry of Finance statistics show that more than half of Japanese exports and about 70% of Japanese imports are invoiced in US dollars—unusually high among advanced countries. However, a fixed-effect panel estimation using the granular Japan Customs transaction data, combined with the most comprehensive firm-level data compiled by the Ministry of Economy, Trade and Industry, presents contrary evidence: most Japanese firms, particularly smaller ones, choose yen-invoiced exports. Only the top one per cent of Japanese firms in size tend to choose US dollar-invoiced exports, leveraging operational hedging through overseas subsidiaries to offset US dollar-denominated import payments with export revenues within group companies. Since large Japanese firms utilise operational hedging, this dependence on the US dollar would not change. Smaller firms with fewer overseas subsidiaries have strong incentives to avoid exchange rate risk by conducting yen-invoiced exports since most of their counterparts are foreign firms with no capital ties. Thus, smaller firms would continue to rely on yen-invoiced exports unless they can utilise financial hedging.