Final answer:
A rise in the value of the Japanese yen against the US dollar increases the real price of Japanese cars for US consumers, as they would require more dollars to buy the same amount of yen to pay for the car. Conversely, it lowers the real price for U.S. cars for Japanese consumers, who now need fewer yen to get the same number of dollars to purchase the car.
Step-by-step explanation:
If the Japanese yen rises against the US dollar, this means that each dollar is less valuable in terms of yen. As a result, when an American consumer wants to buy a Japanese car, they will have to spend more dollars to purchase the same amount in yen. For example, if a Japanese car costs ¥2,000,000 and the exchange rate goes from 100 yen/dollar to 120 yen/dollar, instead of paying $20,000 for the car, the consumer will have to pay $24,000, thus increasing the real price of the car for U.S. consumers.
Conversely, for Japanese consumers looking to buy American goods, their yen now buys more dollars. So, if a U.S. car is priced at $30,000, and the exchange rate shifts as above, where it previously might have cost the Japanese consumer ¥3,000,000 (at 100 yen/dollar), it would now only cost ¥2,500,000 (at 120 yen/dollar). This lowers the real price of the car for Japanese consumers.