Currency Appreciation Reduces Export Competitiveness

Steps:

• Identify the decline in Japan's export ranking from 1st to 8th in electrical components.
• Consider economic factors affecting export performance, such as costs and competitiveness.
• Evaluate how currency changes influence trade: stronger currency raises export prices abroad.
• Match to option D, as yen appreciation would make Japanese goods costlier for foreign buyers.

Why D is correct:

• Currency appreciation increases the relative price of exports in foreign markets, reducing demand and competitiveness per the law of demand.

Why the others are wrong:

• A: Lower opportunity cost would enhance, not diminish, Japan's export advantage.
• B: Tariffs on imports protect domestic producers but do not directly explain falling exports.
• C: Greater deflation lowers production costs, potentially boosting exports rather than harming them.

Final answer: D