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Explanation of the Effective Exchange Rate (Nominal, Real)

April 2019
Bank of Japan
Research and Statistics Department

Basic information

Compilation section : Research and Statistics Department

Frequency of compilation : monthly basis

Time of release : around the 20th business day of the following month

Method of release : Bank of Japan website

Publications : Financial and Economic Statistics Monthly

Commencement of data : January 1970

1. Data and Methodology

(1) Object

The effective exchange rate (EER) is an indicator that captures the international competitiveness of a currency, which cannot be measured only by examining bilateral exchange rates.

The EERs of the Japanese yen are calculated as follows. The weighted average of the yen's exchange rate against other currencies is calculated using the relative importance -- which is measured by the total value of trade, etc. -- as the weights.

(2) Released Series

 Nominal and real effective exchange rates.

(3) Compilation Methodology

The Bank of Japan (BOJ) uses the "broad-based" EERs released by the Bank for International Settlements (BIS) for the latest EERs of the Japanese yen. For details on the "broad-based" rates -- such as the compilation method, coverage, and weights -- see the BIS website (Link to an external website).

As for the EERs from January 1970 to December 1993, the BOJ estimates them retrospectively using the monthly rate of change in the BIS's "narrow-based" rates, since its "broad-based" rates are only available from January 1994.

(4) Other Information

As of April 2019, the BIS calculates the EERs of each economy against around 60 economies for the "broad-based" rates and about 25 economies for the "narrow-based" rates. The EERs released by the BIS enable data users to compare the international competitiveness of currencies based on a common standard. The EERs released by the BOJ, which are calculated using the EERs released by the BIS, also have the same feature.

2. Notice on Usage

The BIS calculates the weights of the EERs every three years after the corresponding period ends, using the three-year average of the total value of trade. For example, the weights for 2017-2019 will be calculated in 2019, after all trade figures for 2017-2019 become available; when the weights are updated, the BIS revises the EERs retrospectively. The BIS continues to use the latest weights to calculate the EERs until the new weights become available.