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Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
-(Scenario: Japan and Canada)Refer to Scenario: Japan and Canada.As a result:

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With a higher interest rate in Japan, investors will want to invest their money there to earn a higher return. This will cause a capital flow from Canada to Japan as investors sell their Canadian assets and buy Japanese ones.

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