Suppose that the real interest rate in Japan and the U.S. Is 3.00%. Furthermore, assume that the nominal (1-year) Interest rate in Japan is 12.50% while the nominal interest rate over the same time period in the United States is 4.50%. The international Fisher effect theory predicts that the expected infilation in the U.S. is 1.50% while the expected Inflation in Japan is 9.50%. From the perspective of the United States (expected U.S. Inflation minus expected Japanese inflation), the expected Inflation rate differential between the two countries is According to purchasing power parity (PPP), using the U.S. as the "home" country, the Japanese Yen should by the same percent as the differential in inflation rates. depreciate Grade Final 1/2 appreciate is companion)