Abstract
Previous research that applied the new nonlinear methods to Japan’s trade balance with the rest of the world or between Japan and its major partner, the U.S., could not discover any asymmetric effects of exchange rate changes. Suspecting that aggregation bias could play a role, in this paper we concentrate on the Japan-U.S. trade balance but disaggregate their trade flows by commodity and consider the response of the trade balance of each of the 56 industries to industry-specific real exchange rate changes. We find short-run asymmetric effects of exchange rate changes in 44 industries and short-run impact asymmetric effects in 19 industries. However, the short-run effects lasted into long-run asymmetric effects in 18 industries. Small as well as large industries are included. Our approach identifies industries that will benefit from a yen depreciation or that will be hurt from a yen appreciation.
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