The KYT business plan for the next 5 years shows a significant increase in business with Japan. The general manager tells you that the operations director is presenting the business case for setting up a wholly owned subsidiary in Japan. To that end, he has asked you to prepare a report paper, to be presented at the board meeting, explaining the foreign exchange exposure risks which would result from such an investment. In particular, he tells you he would like to explain transaction and translation exposure as he has heard that translation exposure risk is only a book entry and not a 'real cost' and so can be ignored.