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While Japanese exports are believed to be invoiced mainly in USD, this study presents contrary evidence that most Japanese firms choose yen-invoiced exports, based on the Japan Customs export declaration data. Only the top one percent of firms in size tend to choose USD-invoiced exports. By conducting fixed-effect panel estimation using the Japan Customs transaction data and the most comprehensive firm-level data compiled by the Ministry of Economy, Trade and Industry (METI), we demonstrate that not only the intra-firm export share but also proxy variables for firm size negatively and significantly affect yen-invoiced exports. Since large-size firms tend to build overseas subsidiaries and to establish global production/sales network, Japanese parent firms will likely manage foreign exchange risk efficiently by choosing the USD. In contrast, smaller-size firms with fewer overseas subsidiaries have incentives to pass on exchange rate risk to importers by invoicing their exports in yen. It is more important for smaller-size firms to improve non-price export competitiveness by R&D expenditures, which helps them increase yen-invoiced exports to avoid foreign exchange risks.
