 |
This study applies the rolling regression approach to the auto-regressive distributed lag (ARDL) model to investigate how Japanese export quantity responded to the yen's real effective exchange rate (REER) over the sample period from June 1992 to December 2023. We also estimate the export price equation using the rolling ARDL model to examine the time-varying exchange rate pass-through (ERPT) or pricing-to-market (PTM). We reveal that the quantity of Japanese exports is unlikely to respond positively to exchange rate changes, except for the Transport Equipment exports. Such unresponsiveness in export quantity likely changed in 2021 when the yen depreciated rapidly and substantially. We also demonstrate that Japanese exporters tended to stabilize the export price in destination markets, which is a typical PTM behavior. More intriguingly, we observe the complete PTM from around 2022 in response to the sharp yen depreciation. Thus, Japanese exporters have not utilized the yen depreciation to increase their export quantity. However, the exporters have raised the degree of PTM in the yen depreciation period to enjoy larger foreign exchange gains.
