5. On January 1, the U.S. dollar:Japanese yen exchange rate is $1 = ¥250. During the year, U.S. inflation is 4% and Japanese inflation is 2%. On December 31, the exchange rate is $1 = ¥235. What are the likely competitive effects of this exchange rate change on Caterpillar Tractor, the American earth moving manufacturer, whose toughest competitor is Japan's Komatsu?
ANSWER. The real value of the yen changed from $.004000 (1/250) at the start of the year to $.004339 (1/235 x 1.04/1.02) at the end of the ...
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