15. Background information and a news article Does the exchange rate between the yen and the dollar affect prices and corporate profits? Should prices be in dollars per yen or yen per dollar? How do exchange rates affect exports to and from a country? The following 2017 article from Asian Review sheds light on these questions. Read the article and then answer the questions that follow. EXCHANGE RATES, PRICE INCREASES HOLD KEY TO PROFIT GROWTH IN JAPAN TOKYO - With earning season set to go into full swing next week, investors are paying attention to guidance for the current year. The following is what you should focus on to figure out if a company is expected to see net profits continue to grow in fiscal 2017. Assumed exchange rates can greatly change a company's earnings forecast. Analysts at Daiwa Securities, a brokerage, will mainly use a yen exchange rate of 115 to the dollar and 120 to the euro for fiscal 2017 earnings predictions. Using those rates, major companies' net profit projections, including financial firms, would get an 11.5% boost. If a rate of 105 to the dollar and 110 per euro is used, the rate of increase drops to 6.5%. Yaskawa Electric announced an assumed rate of 110 yen dollar at its earnings briefing on Thur lay. If more companies, especially those that rely exports, assume a rate of around 105 yen then profit growth projections could fall. All eyes are on performance in America, particularly the many automakers that rely heavily on the country. The U.S. accounts for about 30% of Toyota Motor's global sales, around 40% of Honda Motor's and about 70% of Subaru's. Attention is being paid to their sales plans as replacement demand ebbs and Federal Reserve rate increases make car loans costlier. Countermeasures to cope with labor shortages and stagnant consumption are a key for companies focused on the domestic market. What executives say about their price and labor-saving strategies hold clues. However, "it will probably be hard for the service and retail industries to pass costs on to consumers," pointed out Keiichi Ito, chief quantitative analyst at SMBC Nikko Securities. By industry, electronics makers are seen reaping the biggest benefit, according to Daiwa Securities. Scaling down unprofitable businesses and other "structural reforms made up until now will show their effects this fiscal year," said Kazuhiro Takahashi of Daiwa Securities. He also predicts that earnings for steel and other industries will improve now that China has stopped flooding the market. Source: "Exchange Rates, Price Increases Hold Key to Profit Growth in Japan," Asian Review: Japan-Update, April 22, 2017, https://asia.nikkei.com/Markets/Tokyo-Market/Exchange-rates-price-increases-hold-key-to-profit-growth-in-Japan. How can the Federal Reserve bank of the United States negatively affect Japanese car exports? O If the Federal Reserve rate increases, fewer U.S. buyers could get automobile loans, and thus, fewer U.S. buyers could afford a new Japanese car. O If the Federal Reserve rate decreases, fewer U.S. buyers could get automobile loans, and thus, fewer U.S. buyers could afford new Japanese car. O If the Federal Reserve rate increases, Japanese automakers would be unwilling to sell their product in the United States. If the Federal Reserve rate decreases, Japanese automakers would be unwilling to sell their product in the United States. If assumed exchange rates happen to be lower than the actual exchange rates, the profit of Japanese companies will turn out to be expected.