Answer:
A change in the exchange rate between two currencies affects the balance of trade between the two countries.
Step-by-step explanation:
In 2018, the exchange rate changed from $1=110 Yen to $1=105 Yen. This means that the US dollar has become stronger relative to the Japanese Yen. As a result, the US dollar can buy more Japanese Yen than before. This change will have the following impact on the balance of trade:
US exports to Japan will become more expensive in Japanese Yen terms. This means that Japanese consumers will have to pay more Yen to purchase US goods. As a result, US exports to Japan may decline, and the balance of trade may become negative.
Imports from Japan will become less expensive in US dollar terms. This means that US consumers will have to pay less US dollars to purchase Japanese goods. As a result, imports from Japan may increase, and the balance of trade may become more negative.
In 2019, the exchange rate changed again from $1=105 Yen to $1=120 Yen. This means that the Japanese Yen has become stronger relative to the US dollar. As a result, the Japanese Yen can buy more US dollars than before. This change will have the following impact on the balance of trade:
US exports to Japan will become less expensive in Japanese Yen terms. This means that Japanese consumers will have to pay fewer Yen to purchase US goods. As a result, US exports to Japan may increase, and the balance of trade may become more positive.
Imports from Japan will become more expensive in US dollar terms. This means that US consumers will have to pay more US dollars to purchase Japanese goods. As a result, imports from Japan may decline, and the balance of trade may become less negative.