An Empirical Study on the Effect of RMB Real Exchange Rate Change on Sino-Japan Trade from 2000 to 2011

This paper measured the volatility of RMB against Yen's real exchange rate using GARCH model and analyzed empirically the effect of RMB real exchange rate change on Sino-Japan trade based on the Co-integration Test and Error Correction Models.The result indicates that in the long term there exist positive income effect and negative exchange rate fluctuation effect in Sino-Japan trade.Moreover,the effect of export price is positive,the effect of import price is negative and the elasticity of export price is higher than the elasticity of import price;China's real income level is key impetus to improve Sino-Japan trade.In the short run,devaluation of RMB can not improve the state of Sino-Japan trade deficit,and the transformation to long-run equilibrium of Sino-Japan trade deficit is slower.Whether in long-run or short-run,the effect of reform of RMB exchange rate system on Sino-Japan trade is not significant.Therefore,the way out for problem lies in the optimization of China's economy structure and export structure other than RMB's exchange rate.