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Explanation of the Effective Exchange Rate (Nominal, Real)


January 2023
Bank of Japan
Research and Statistics Department

Basic information

Compilation section : Research and Statistics Department

Frequency of compilation : monthly basis

Time of release: around 2-3 business days after the publication date of the Bank for International Settlements (BIS) "Effective exchange rate indices"

Method of release : Bank of Japan website

Commencement of data : January 1970

1. Data and Methodology

(1) Object

The nominal effective exchange rate (NEER) is a summary measure of the changes in the bilateral exchange rates.

The NEER of the Japanese yen is calculated as the weighted average of the yen's exchange rate against other currencies using the relative importance, which is measured mainly by the total value of trade, as the weights. The real effective exchange rate (REER) of the Japanese yen reflects inflation in Japan and other economies in this calculation.

(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 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 January 2023, the BIS calculates the EERs of each economy against around 65 economies for the "broad-based" rates and about 25 economies for the "narrow-based" rates.

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 2020-2022 will be calculated after all trade figures for 2020-2022 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.