Managing Currency Risk


Managing Currency Risk

How Japanese Firms Choose Invoicing Currency

9781785360121 Edward Elgar Publishing
Takatoshi Ito, Professor, School of International and Public Affairs, Columbia University, US, Senior Professor, National Graduate Institute for Public Studies, Japan and RIETI, Satoshi Koibuchi, Professor, Faculty of Commerce, Chuo University, Japan and RIETI, Kiyotaka Sato, Professor, Department of Economics, Yokohama National University, Japan, Adjunct Professor, School of Business and Law, Edith Cowan University, Australia and RIETI and Junko Shimizu, Professor, Faculty of Economics, Gakushuin University, Japan and RIETI
Publication Date: 2018 ISBN: 978 1 78536 012 1 Extent: 288 pp
This book demonstrates how exporters’ decisions regarding choice of invoice currency can be influenced by many factors including firm size, product competitiveness, intra/inter-firm trades, and the geography of export destination. The aim is to enhance our understanding of exporters’ behavior in terms of managing currency risk. It contains detailed research and insightful data focusing on Japanese exporters and shows how they face an important trade-off in choosing the invoice currency. If exports are invoiced in yen, then exchange rate fluctuations will pass through to retail prices ultimately affecting sales volumes. However, if they choose to invoice in the importer’s currency, then sales volumes are largely unchanged.
Nikkei Prize for Excellent Books in
Economic Science 2019

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The yen is now one of the major currencies freely traded in the world, and yet, many Japanese exporters take on a currency risk by invoicing in US dollars. In this book, the authors examine why this is the case, particularly for those exporters who have a strong presence in global markets.

Managing Currency Risk enhances our understanding of exporters’ behaviour by analysing the key factors that influence their choice of invoice currency. Detailed research based on unique data sets is used to highlight how firm size, product competitiveness, intra/inter-firm trade and the geography of export destination impact this decision.

This book is a valuable resource for international finance researchers and political economists wishing to discover up-to-date information regarding currency invoicing by multinational firms. It will also be a vital tool for financial and governmental practitioners to discover more about their competitors’ behaviour.
Critical Acclaim
‘‘n Managing Currency Risk, Takatoshi Ito and a team of collaborative scholars ... have returned with a brilliant new piece of research on how international currencies get defined and used. Well-written, concise and with a new approach to international currencies as well as conclusions that can be extended beyond the yen, this book will be useful for students of international finance, analysts who delve into international currencies, financial managers and renminbi trackers.’
– Oscar Ugarteche, LSE Review of Books

‘This is an important book that gives us a detailed look into why Japanese firms do business. Rather than just rely on regressions, the authors do something rarely seen in economics: they talk to their data by conducting surveys and interviews with Japanese firms. This method adds a tremendous richness to their analysis.’
– David E Weinstein, Columbia University, US

‘This book is a spectacular achievement. Based on unique interviews and questionnaire surveys, it provides various insights on the invoicing currency behavior of Japanese exporters. It will be useful not only for academic research but also for policymakers.’
– Shin-ichi Fukuda, University of Tokyo, Japan

‘This book employs new data sets based on both interviews and questionnaire surveys of Japanese manufacturing firms operating globally. The information is used to obtain novel and convincing findings regarding the determinants of invoice currency choice and currency risk management by focusing on export destination, arm’s-length vs. intra-firm trades, and types of subsidiaries.’
– Eiji Ogawa, Hitotsubashi University, Japan

Contents: 1. Introduction 2. Choice of Invoice Currency in Japanese Trade: Industry- and Commodity-Level Analysis 3. Findings from Interviews with Globally Operating Japanese Firms 4. Analysis of Questionnaire Surveys on Head Offices 5. Exchange Rate Risk Management in Japanese Firms 6. Invoice Currency Choice in Global Production and Sales Networks 7. Invoicing Currency and Yen Internationalization References Index

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