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Investigating How Exchange Rates Affected the Japanese Economy after the Advent of Abenomics

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  • Willem THORBECKE

Abstract

News of aggressive monetary easing by the Bank of Japan in late 2012 contributed to a 45 percent depreciation of the Japanese yen relative to the U.S. dollar. This paper investigates how the depreciation affected the Japanese economy. Exports responded much less than predicted, especially for sectors related to transportation equipment. Imports also responded less than predicted, and the sum of export and import elasticities are too small to meet the Marshall-Lerner condition. The depreciation raised returns for many Japanese stocks, with the response being largest for automobile stocks. The depreciation also raised aggregate Japanese stock returns by twice as much after 2013 as before. This indicates that responses that corporate Japan made to swings in the yen such as transferring production abroad have been good for profitability.

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  • Willem THORBECKE, 2022. "Investigating How Exchange Rates Affected the Japanese Economy after the Advent of Abenomics," Discussion papers 22003, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:22003
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    References listed on IDEAS

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    Cited by:

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    2. Willem THORBECKE, 2022. "U.S. Trade Imbalances, East Asian Exchange Rates, and a New Plaza Accord," Discussion papers 22115, Research Institute of Economy, Trade and Industry (RIETI).

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