chapter  4
ATTITUDES TOWARDS RISKS
Pages 22

In one way or the other, most foreign exchange transactions are depending on, and reacting to, the risk of future exchange rate changes. This does not only hold for capital flows and portfolio investments. Even an exporter who receives a fixed amount in foreign currency he wants to change, or an importer needing to buy foreign currency to pay his bills, normally has some scope for at least leading or lagging the payment and chosing a favourable moment for the trade. Basically, there are three ways to deal with foreign exchange risk: to take it, to hedge it or deliberately to assume it. Doing nothing is not a risk-free alternative but simply another way of risk taking. In order to judge properly the behaviour of Japanese firms, in the following sections, a short introduction to some basic concepts will be given at the beginning before turning in detail to the actual strategies adopted.