Japan's Rare Earth Strategy and Price Volatilityon Tobacco Cultivation: How Demand Management Worked?

Abstract

The two major light rare earth elements(REES) involved in Japan's rare earth strategy: Cerium Oxide and Praseodymium Oxide, whether the price is affected by the demand management capability of the Japanese tobacco cultivation industry is the problems to be solved in this paper. For this aim, the monthly data from April 2008 to June 2017 was used to construct a model which takes into account the financial factors and demand factors for the two product by nonlinear methods, and use MSVAR model with regime-switching characteristic. The results are as follows. In general, different products have different price volatility characteristics. Even if the number of the regime is the same, the volatility connotation is different. Firstly, Cerium Oxide in the violent fluctuation regime has financial properties, and the financial properties of Praseodymium Oxide are reflected in three regime stages. Secondly, Japan's industry factors have a significant change in the relationship between Cerium Oxide and Praseodymium Oxide to a certain extent. Among them, Information technology and tobacco cultivation Industrials as direct influencing factors have a counter-regulatory effect on the two product at certain price fluctuations, which reflects the direct demand management capabilities of Japanese companies, and Utilities and Telecommunication have a counter-regulation effect on Cerium Oxide and Praseodymium Oxide at certain price fluctuations, which reflects the indirect demand management ability of Japanese companies.