This study examines how Japanese exporting firms adjust export prices in response to exchange rate fluctuations and how export volumes respond to these price changes, utilizing export-import declaration data collected by Japan Customs combined with firm-level information for the period from 2014 to 2020 taken from an annual survey by the Ministry of Economy, Trade, and Industry. The estimation results suggest that firms with a high import intensity tend to choose foreign currency invoicing and that the choice of foreign currency invoicing leads to incomplete exchange rate pass-through (ERPT). Moreover, not only is the ERPT small, changes in export volumes in response to price fluctuations are also quite small. Further, it takes over a year for changes in export prices to have a significant effect on export volumes. The elasticity of the volume of intermediate goods exports is particularly small.

These results suggest that involvement in global value chains, which entails actively importing intermediate goods from abroad and exporting them for further processing in foreign countries, has a significant impact on firms’ pricing strategies and the responsiveness of export quantities to exchange rate fluctuations.</p>