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The United States presently has a current account deficit with Japan. What would happen to the dollar/yen spot exchange rate and the current account deficit if there were a decrease in Japanese investment in the United States? Incorporate that foreign exchange market into your answer.

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When Japanese foreigners are dumping their investment holdings in the US, the currency market is flooded with the USD. This means the USD has more supply than demand. This in turn leads to a decrease in the currency value of the USD compared with the JPY, or ...

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