PRICING TO MARKET IN JAPANESE MANUFACTURING

This paper investigates pricing by Japanese manufacturing firms in export and domestic markets. The paper reports equations explaining the margin between export prices in yen and domestic prices for seventeen products in the transport and electrical machinery industries. Evidence is presented showing that Japanese firms respond to changes in real exchange rates by 'pricing to market', varying their export prices in yen relative to their domestic prices. The empirical specification makes it possible to disentangle planned changes in the margin between export and domestic prices from inadvertent changes in this margin due to unanticipated changes in exchange rates. © 1990.