Final answer:
An increase in the demand for Japanese yen under a flexible-exchange-rate system would cause the U.S. dollar to depreciate, meaning more dollars are needed to buy yen. Exchange rates can fluctuate significantly over time, impacting international trade and economic stability.
Step-by-step explanation:
Under a flexible-exchange-rate system, an increase in the demand for Japanese yen would cause the U.S. dollar/Japanese yen exchange rate to appreciate. This means the value of the yen rises relative to the dollar, so it will take fewer yen to purchase one dollar. As a result of increased demand for yen, the U.S. dollar depreciates in comparison, meaning you would need more dollars to buy the same amount of yen.
Looking at historical data, we can see that exchange rates fluctuate based on market conditions and investor sentiment. For example, according to Figure 29.11, the yen underwent periods of both appreciation and depreciation against the dollar over different years. Such movements can create economic stress as businesses engaged in international trade must adjust their strategies to account for fluctuating rates.