JAPAN AUSTRALIA Real Rate Real Rate Interest Interest Supply 6% Supply X 2% -- X Demand Quantity of Quantity of Loanable Funds Loanable Funds The loanable funds markets in Japan and Australia are in equilibrium, as shown in the graphs above. Which of the following is most likely to happen? There will be financial capital outflows from Australia to Japan, and the Japanese yen will depreciate. There will be financial capital outflows from Australia to Japan, and the Japanese yen will appreciate. There will be financial capital outflows from Japan to Australia, and the Australian dollar will depreciate. There will be financial capital outflows from Japan to Australia, and the Australian dollar will appreciate. There will be no change in financial capital flows between Australia and Japan, keeping the foreign exchange rate unchanged