If the interest rate in Japan increases, investors increase their demand for yen, and the yen's exchange value appreciates.

Question

Quizplus · Accepted Answer

When the interest rate in a country increases, it makes the currency more attractive to investors seeking higher returns. This leads to an increase in the demand for that currency and causes its exchange value to appreciate. Therefore, if the interest rate in Japan increases, investors will increase their demand for yen, causing the yen's exchange value to appreciate.

If the Interest Rate in Japan Increases, Investors Increase Their