Answer: increase by 4% in one year.

According to uncovered interest rate parity (UIRP), the expected change in the exchange rate should equal the interest rate differential between the two countries. **Calculation:** - Interest rate differential = US rate - Japan rate = 6.25% - 2.25% = 4% - Since the US has higher interest rates, the USD is expected to depreciate against JPY - For JPY/USD (JPY per USD), depreciation means the exchange rate increases Therefore, the JPY/USD rate is expected to **increase by 4%** in one year.

Author: LeetQuiz Editorial Team