ABSTRACT
By investigating various data at both the customs- and firm-levels, we present the new evidence of Japanese firms’ invoice currency choices. Contrary to stylised facts, we demonstrate that Japanese firms tend to choose the U.S. dollar or importer’s currency for trade invoicing in Japanese exports to advance countries, irrespective of the differences in industry characteristics or product differentiation, while they choose the yen-invoiced transactions in exports to Asian countries. More interestingly, Asia-based Japanese subsidiaries tend to use mainly the yen and the U.S. dollar for trade invoicing in their trade with Japanese head offices and group companies. On the other hand, in Asia-based subsidiaries’ trade with other countries excluding Japan, the yen is rarely used, even in intra-firm trade, and the U.S. dollar is dominantly used for trade invoicing. Even though Japanese subsidiaries increase their intra-firm trade with other Asia-based group companies, the use of the yen in Asia will not be growing. Instead, the U.S. dollar will continue to be used increasingly. These findings have significant policy implications for the further use of the yen in the process of Asian economic integration.
JEL Classification: F23, F31, F33
