This question focuses on Pricing and exchange rates: On January 1, the U.S. dollar: Japanese yen exchange rate is $1 = ¥250. During the year, U.S. inflation is 4% and Japanese inflation is 2%. On December 31, the exchange rate is $1 = ¥235. What are the likely competitive effects of this exchange rate change on Caterpillar Tractor, the American earth moving manufacturer, whose toughest competitor is Japan's Komatsu in the US market assuming that both companies manufacture their products in their home market? What competitive strategies would you suggest for Komatsu? If the appreciation of the ¥ is expected to continue over the next few years, what strategic alternatives should be considered by Caterpillar, by Komatsu?