What effect might the depreciation of the U.S. dollar relative to the Japanese yen have on imports and exports to and from each country?

Question

What will be an ideal response?

Answer 1

Depreciation of the U.S. dollar relative to the Japanese yen means that fewer yen are needed to obtain one dollar and, conversely, more dollars are needed to purchase a given amount of yen. This means that U.S. goods become less expensive in terms of Japanese yen as the Japanese can now obtain dollars at a better rate to buy the U.S. goods and services. U.S. exports to Japan should rise. On the other hand, Japanese imports become more expensive to Americans as it takes more dollars to obtain a given amount of yen. Therefore, Japanese imports to the United States should decline (assuming other things remain equal).