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Why do Japanese giant trading companies prefer foreign currency to Japanese yen?

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Abstract

This article examines invoicing strategies in the presence of forward exchange markets. The choice of invoice currency is shown to depend upon the monopoly power traders possess. If the exporter has greater market power to determine the use of invoice currency, invoicing in the currency of the importing country will be preferred. But if the importer has power to determine what currency to use, the converse is true. Moreover, the levels of trade and employment are proven to be invariant to invoicing strategies chosen.

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Authors and Affiliations

  1. Department of Economics, College of Law, National Taiwan University, 21, Shu Chow Road, 100, Taipei, Taiwan R.O.C.

    Chau-Nan Chen

  2. Graduate Institute of Economics, College of Law, National Taiwan University, 21, Shu Chow Road, 100, Taipei, Taiwan R.O.C.

    Chau-Nan Chen

  3. York University, Canada

    Shin-Hwan Chiang

  4. National Taiwan University, Taiwan

    Shin-Hwan Chiang

Authors
  1. Chau-Nan Chen
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  2. Shin-Hwan Chiang
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Chen, CN., Chiang, SH. Why do Japanese giant trading companies prefer foreign currency to Japanese yen?. Rev Quant Finan Acc 2, 179–186 (1992). https://doi.org/10.1007/BF00243801

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  • DOI: https://doi.org/10.1007/BF00243801

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