NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Price and Output Adjustment in Japanese Manufacturing

William H. Branson, Richard C. Marston

NBER Working Paper No. 2878
Issued in March 1989
NBER Program(s):The International Trade and Investment Program, The International Finance and Macroeconomics Program

This paper investigates the importance of markup behavior in Japanese manufacturing. According to the evidence presented, Japanese firms have varied the markups of prices over marginal costs in order to limit the effects of exchange rate changes on output. This behavior is quite different from that found in U.S. manufacturing where output and employment have borne the main impact of recent exchange rate changes. The paper examines markups in nine sectors of manufacturing which are major producers of exports. In all nine sectors, Japanese prices prove to be highly sensitive to foreign prices and exchange rates as well as to more traditional demand and supply variables. The paper shows that variable markups rather than high price elasticities account for this price behavior, since output is relatively insensitive to prices or exchange rates.

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Document Object Identifier (DOI): 10.3386/w2878

Published: International Productivity and Competitiveness. ed. Bert Hickman, Oxford: Oxford University Press, 1990.

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