A decade ago, the Japanese yen stood at about 120 Yen/$; 10 years later, the Japanese yen is trading at about 105 Yen/$. Consider the case of the heavy earth-moving equipment industry, consisting of essentially two major players globally, US-based Caterpillar and Japan-based Komatsu.

a. What has happened to the Japanese Yen and how does it affect the relative competitive positions of Caterpillar and Komatsu?

b. How should this affect the strategic behavior of the two firms? Answer from the short-term perspective, and then from the long-term perspective.