THE YEN AND JAPANESE MANUFACTURING EMPLOYMENT

Using two-level industry-level data from 1975 to 1994, we estimate the effects of fluctuations of the yen, through movements in foreign pric es, on Japanese manufacturing employment. First, we find that an excha nge rate induced change in foreign industry-specific prices has a size able effect on Japanese employment in the long-run. Second, we cannot detect any difference between the high and low export sectors in their responsiveness to exchange rates. A by-product of our research is the construction of industry-specific real exchange rates for Japan that are probably the most careful to date, allowing us to examine the chan ging competitiveness of Japanese industries. (C) 1998 Elsevier Science Ltd. All rights reserved. JEL classifications: F12, F14, F41.