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Chapter 4 examines a data set based on the questionnaire surveys in 2009 and 2013. Questionnaires were sent to head offices of all Japanese manufacturing firms listed on Japan’s stock exchanges and that reported foreign sales in their consolidated financial statements. Major findings are as follows: while yen invoicing is often chosen for arm’s-length trade, the importer’s currency tends to be used in invoicing in intra-firm trade. In exports to Asian subsidiaries, US dollars are widely used. Firm size does affect the choice of invoice currency because the larger (smaller) the size of a firm, the less (more) likely the yen is to be chosen. Growing and deepening regional production networks in Asia are likely to discourage yen-invoiced transactions, even by Japanese firms. Japanese production subsidiaries that export finished goods to the world tend to choose US dollar-invoiced transactions even for their imports of semi-finished goods from their head offices.

Chapter 2 surveys recent developments in theoretical and empirical studies on the question of invoice currency choice. By examining aggregate data on invoice currency, published by the authorities, it is shown that the Japanese invoicing currency pattern violates well-known stylized facts: (1) trade between advanced countries tends to be invoiced in the exporter’s currency; (2) trade between advanced and developing countries tends to be invoiced in the advanced country’s currency; and (3) differentiated products tend to be invoiced in the exporter’s currency. More homogeneous products are typically invoiced in an international currency such as the US dollar. Chapter 2 presents two puzzles. First, Japanese exports to advanced countries tend to be invoiced in the importer’s currency; and second, the share of US dollar invoicing is higher than that of yen invoicing in trade with Asia. In order to solve these puzzles, subsequent chapters examine firm-level data obtained through interviews and questionnaire surveys.