Introduction
BUS FPX 4016 Assessment 3 Most goods available in the United States are produced elsewhere, creating the concept of exchange rates. The essay discusses its effect on Japanese yen and sells Japanese goods in the United States.
Analysis of Exchange Rate Influence
The existing rate of exchange between Japanese yen and the US dollar reflects the relative weakness of the yen, has a value equal to $ 0.0095 with 1 yen, 1 US dollar (Japanese Yen Currency B.) is equivalent to 105.62 Yen. Due to this, importation of products from Japan becomes cost -effective compared to domestically produced colleagues, allowing firms to create enough benefits in terms of selling such products in the United States.
Effects of Exchange Rate Changes on Export Profitability
Rift in the exchange rates entails a threat to profitability while selling products to America. Even modest fluctuations can considerably impact costs. For instance, if Yen is strengthened, organizations can raise prices, leading to the surplus. On the contrary, a falling yen can augment profitability, where costs go down. To minimize these risks, most firms prefer to push transactions in a stable frame of mind, e.g., the US dollar, which minimizes the risk of exchange rates (International Trade Association, ND).
BUS FPX 4016 Assessment 3 Currency Exchange Risks
Identification of Management Risks
Foreign export management encounters various risks, primarily with fluctuations in the exchange rate. Specifically, inflation in Japan can interrupt the substantial devaluation of the yen, causing a shortage of production and cutting the supply of Japanese products to US markets (Chains, 2020). Moreover, a weak dollar is a threat to US businesses, which may interrupt their ability to get rid of loans or to transport imported goods, consequently impacting profitability (Chain, 2020).
References
Chen, J. (2020, August 28). Currency risk. October 10, 2020 https://www.investopedia.com/terms/c/currencyrisk.asp
International Trade Association. (Raw.). Forex risk.https://www.trade.gov/foreign-exchange-risk
Japanese Yen Currency Course Tables. (Raw.). October 10, 2020https://www.x-rates.com/table/?from=JPY
