Pricing-to-Market: the Japanese Experience with a Falling Yen and the Asian Crisis

The paper examines whether Japanese exporters changed their strategic pricing behavior as a result of the profit squeeze of the late 1980s. It shows that shocks such as the end-of-bubble, the prolonged yen depreciation, and the Asian crisis affected export prices. These effects, however, are too small to change the long-run equilibrium relation between sectoral export prices and their determinants. In particular, results suggest that Japanese exporters are not using the depreciation of the yen to gain market share.