The Impact of ?Brexit? on Japanese International Trade in EU

Brexit is an abbreviation for “British exit,” meaning the United Kingdom's (UK's) decision on June 23, 2016, to leave the European Union (EU). The national vote's result surprised global markets and caused immediate turmoil. As the UK has a large and traditional financial market and is a gateway to the EU for international investment and trade, people have much fear, which has caused serious recession all over the world. Japan, which has taken advantage of the relationship between Japan and UK and between the UK and EU, is not an exception. This paper examines the impact of Brexit on Japanese activity in the UK and EU. The gravity model of international trade was employed for empirical analysis. This model states that bilateral trade flows based on the economic sizes and distances between two units can be used to examine reasons for international trade. Empirical analysis in this paper indicates that Brexit has impacted Japanese international trade considering the relationship between the UK and EU.