[Vol.29 No.4] An Empirical Analysis of the Impact of Yen Exchange Rate Fluctuations on Japanese Exports: A Comparison Before and After the Great East Japan Earthquake

Foreign Exchange
Research Planning & Coordination Team (82-2-759-5490)

Author: Joon-heon Song(Tokyo International University)

The Great East Japan Earthquake triggered a paradigmatic shift in Japan’s trade patterns, accentuated by an increased asymmetry between yen exchange rate fluctuations and export flows. Using a Vector Autoregression with exogenous variables (VARX) model, this study conducted an empirical analysis of the dynamic interactions between the yen/dollar exchange rate and Japanese exports with time series data from January 2001 to March 2023. Our findings reveal that yen exchange rate fluctuations impact exports in an asymmetrical manner. Firstly, a yen depreciation led to a notable increase in yen-denominated exports, but dollar-denominated export values remained largely unchanged. Secondly, the influence of the exchange rate on exports significantly decreased in the aftermath of the Great East Japan Earthquake. Lastly, even when a depreciation in the exchange rate results in an uptick in yen-denominated export values, it does not necessarily translate to a corresponding increase in export quantities—a trend more evident after the earthquake. This study further explores both micro and macro-level factors contributing to the subdued responsiveness of Japanese exports to exchange rate changes.

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