Junko Shimizu - Academia.edu (original) (raw)

Papers by Junko Shimizu

This paper is to investigate advantages and disadvantages of common currency basket denominated b... more This paper is to investigate advantages and disadvantages of common currency basket denominated bonds over international currency denominated ones in terms of both foreign exchange risks and liquidity. Our empirical analysis obtained the following results: (i) the currency basket denominated bonds would be able to decrease foreign exchange risks in both borrowing and investment sides; (ii) the US dollar has the highest degree of liquidity for all of the nine East Asian currencies; (iii) both investors and bond issuers face trade-off between foreign exchange risks and liquidity.

In this paper, we present new findings of Japanese firms' exchange rate risk managements base... more In this paper, we present new findings of Japanese firms' exchange rate risk managements based on the information from the questionnaires sent to all Tokyo Stock Exchange listed firms. We confirm that Japanese firms utilize operational hedging, financial hedging strategies and pricing policies depending on their own choice of invoicing currency in order to mitigate the impact of currency fluctuations. In addition, scoring the robustness points of Japanese firms' exchange rate risk management, we find that Japanese firms' exchange risk management is more vulnerable as the size of firms becomes smaller. Although most large size firms are less affected by sudden appreciation of the yen by combining multiple techniques of exchange rate risk management, some medium and small size firms are not enough equipped to deal with unexpected exchange rate risk.

The North American Journal of Economics and Finance, 2018

The currency invoicing patterns of firms in Japan is one of the most interesting research issues,... more The currency invoicing patterns of firms in Japan is one of the most interesting research issues, because, unlike other developed countries, it is not the yen but the U.S. dollar that plays a major role in currency invoicing of Japanese trade. However, detailed data on the invoicing choice is not available, presenting a major obstacle to rigorous empirical examination. To

This paper, through interviews with 12 major Japanese firms, has revealed new "stylized fact... more This paper, through interviews with 12 major Japanese firms, has revealed new "stylized facts" of the Japanese firms' strategy of currency invoicing, foreign exchange risk managements, and price-setting in recent years. It is also investigated whether these stylized facts are consistent with what has been theoretically and empirically found in the literature. First, the amendment of Foreign Exchange and Foreign Trade Control Law in 1998 had significant impact on the foreign exchange risk management of Japanese firms. Electronics and automobile companies pursue the most efficient settlements of trade transactions under the amended law, and currency invoicing is one of the most important strategic variables to optimize their foreign exchange risk managements. Second, as intra-firm trade has been increasingly a major part of their external trade, Japanese electronics and automobile companies have a strong tendency to choose local currency invoicing in exports to advanced countries, while U.S. dollar invoicing has been increasing when exporting to East Asian countries. Such an invoicing strategy aims at stabilizing the local currency (or U.S. dollar) price of their exports in local markets, which conforms to the pricing-to-market (PTM) behavior discussed in the literature. Third, the recent increase in U.S. dollar invoicing in East Asia can be attributed to (i) U.S. dollar's dominant role of world financial and foreign exchange transactions, (ii) the importance of the U.S. markets as a final export destination, and (iii) the increasing intra-firm transactions as Japanese firms has established regional production networks. Fourth, the currency invoicing and price-setting strategies are affected by competitors in global markets where it is hard to pass-through exchange rate risks to importers due to the strong market competition. Since U.S. dollar invoicing is now dominant in the East Asian markets, not only Japanese parent companies but also local affiliates in East Asia will take exchange rate risks against the U.S. dollar if the dollar fluctuates unstably. As the intra-regional trade keeps growing, it will become more important for East Asian countries including Japan to stabilize the exchange rate not vis-a-vis the U.S. dollar but between the regional currencies. This aspect will have important implications for new strategy of optimal exchange rate risk management and, hence, establishing regional currency arrangements such as a common currency basket in East Asia.

Ogawa and Shimizu (2005, 2006a) have proposed a possible way to create an Asian Monetary Unit (AM... more Ogawa and Shimizu (2005, 2006a) have proposed a possible way to create an Asian Monetary Unit (AMU) as a weighted average of the thirteen East Asian currencies (ASEAN + China, Japan, and Korea) and developed AMU Deviation Indicators for a surveillance process under the Chiang Mai Initiative. Both the AMU and the AMU Deviation Indicators are important in helping the countries in the region to recognize the necessity of moving toward a common currency basket system. However, there remains an open question about how to implement this system in East Asian countries. The purpose of this paper is to compile the latest issues of currency basket itself and to develop concrete steps toward a common currency basket system in East Asia. Particularly, we simulate possible individual currency basket weights based on trade shares of each East Asian country and convert them to G3 currency (the US dollar, the euro, and the Japanese yen) basket weights. We also investigate the discrepancies between ...

In this paper, we construct the daily nominal effective exchange rate (NEER) of the Japanese yen ... more In this paper, we construct the daily nominal effective exchange rate (NEER) of the Japanese yen for eight major manufacturing industries, which provides a better indicator to reflect differences in international competitiveness across industries compared with the conventional NEER. By applying these datasets on stock return and pass-through by industry, we confirm that there are different effects by industry. As the Japanese yen appreciated substantially against the U.S. dollar and other major currencies following the Lehman Brothers collapse in September 2008, it has become increasingly important to watch the daily fluctuations of the Japanese yen, not only at the effective base but also by industry. The daily industry-specific NEER could be reflected in the formulation of policies and can determine which industries should be prioritized in emergency measures against a rising yen.

There have been only a few studies that empirically examine the firm's decision on price setting ... more There have been only a few studies that empirically examine the firm's decision on price setting or currency invoicing in international trade. This paper is the first study that conducts the questionnaire survey with all manufacturing firms listed in Tokyo Stock Exchange concerning the choice of invoicing currency at a firm level. Questionnaires were sent out to 920 Japanese firms in September 2009 and 227 firms responded. We present the new firm-level evidence on the choice of invoicing currency by destination and by type of trading partner, and also the share of invoicing currency of Japanese production subsidiaries in Asia. By conducting cross-section analysis, we found the following evidences: (1) highly differentiated goods and/or strong competitiveness of the products promote Japanese yen invoicing in exports to all countries, (2) larger share of intra-firm trade in exports promotes importer's currency invoicing in exports to advanced countries, and (3) the production-sales networks of Japanese firms whose Asian production subsidiaries export their final products to other countries/region promote US dollar invoicing in exports to Asian countries.

In this study, we investigate the movements of the nominal effective exchange rates (NEER) of Eas... more In this study, we investigate the movements of the nominal effective exchange rates (NEER) of East Asian currencies and the Asian Monetary Unit (AMU), which is the weighted average of East Asian currencies, during the course of the global financial crisis. We found that the NEER were more stable in countries that adopted the currency basket system even during the financial crisis. Comparisons made between the NEER and a combination of the AMU and AMU Deviation Indicators show intra-regional exchange rates among the East Asian currencies, and that there have been strong relationships between them before and after the global financial crisis. Accordingly, monitoring both the AMU and the AMU Deviation Indicators is effective in stabilizing the NEER of East Asian currencies. In this respect, our findings indicate that the AMU Deviation Indicators as well as the AMU will play a very important role in the surveillance of the stability of intra-regional exchange rates.

The North American Journal of Economics and Finance, 2018