Analysis of fiscal and monetary impacts of the U.S. wheat exports to Japan

Wheat is one of the most essential agricultural commodities in the world, and one of the top three commodities produced by the U.S. The U.S. exports the majority of its wheat. Japan has been a major market for U.S. wheat, mainly purchasing hard red winter, hard red spring, and soft white wheats.

The objective of this study is to measure the impacts of macroeconomic variables on U.S. wheat exports to Japan. Two major hypotheses were proposed: (1) the exchange rate plays a significant role in affecting the level of U.S. wheat exports to Japan and (2) other macroeconomic variables impact the level of U.S. wheat exports to Japan. Three economic theories were integrated to incorporate the exchange rate and other macro variables in the same demand equations.

In accordance with previous research in this area, the results led to ambiguity in what actually impacts the level of agricultural exports. The results did not have any significance In showing that the exchange rate and other macro variables had an impact on the level of exports. Three reasons for perhaps the non-influence on exports is one, monetary variables do not determine the exchange rate and thus, do not influence U.S. wheat exports to Japan through the exchange rate. Two, political reasons which cannot be quantitatively measured and three, Japan has a government agency which does all of the purchasing of wheat for its country. The government intervention could, in fact, break off some kind of link between macro variables and agricultural exports.