Fluctuations in currency exchange rates can have significant effects on business costs, asset values, and profitability. Therefore, it is important for managers to be familiar with exchange rates and currency considerations and to understand the risks involved in currency exchange.
Complete the following:
Examine the concept of the exchange rate between the Japanese yen and the U.S. dollar. Choose a Japanese company, such as Toyota, Canon, or Mitsubishi, and identify a strategy that the company might consider to reduce its currency exchange risk associated with Japanese and U.S. currencies.
Write an analysis in which you include the following:
Identify the exchange rate of the Japanese yen and the U.S. dollar.
Discuss the resulting value of selling goods in the United States exported from Japan.
Explain how weekly changes in the exchange rate would affect profitability for exports from Japan to the United States.
Identify risks related to changes in the exchange rate from a management perspective.