Falling yen feared to adversely affect Korean exporters

An worker on the headquarters of Hana Financial institution followers a handful of yen with U.S. greenback payments within the rear on March 23. Newsis

By Anna J. Park

Because the Japanese yen has fallen to a close to seven-year low this month amid a worldwide vitality worth hike and worsening commerce stability, considerations are rising that the yen’s depreciation might weaken native corporations’ export competitiveness.

The yen rose to 122.4 yen in opposition to the greenback, which is its weakest stage since November 2015. Its worth in opposition to the greenback fell by greater than 5 % up to now three weeks.

Reflecting the worldwide weakening of the yen, the trade charge for 100 Japanese yen to the Korean gained has additionally fallen to its lowest stage up to now few years. Particularly, the trade charge hit 1,000 gained ($0.82) for the primary time on Wednesday, though it completed at 1,002.26 on Friday.

The core motive for the weakening yen lies within the differing financial insurance policies between the U.S. and Japan. Whereas the U.S. Fed has been confirming its strikes to boost its rate of interest this yr, the Financial institution of Japan (BOJ) maintains its financial easing coverage for financial stimulation, leading to a fall for the yen. As well as, Japan’s worsening commerce stability amid worth hikes of worldwide vitality costs has additionally accelerated the yen’s fall.

Usually, the depreciation of a rustic’s forex strengthens its export competitiveness, and Korean companies that globally compete with Japanese corporations are anticipated to expertise opposed results with a weakened worth competitiveness in comparison with their Japanese counterparts.

Though it’s nonetheless not seen as a section severe sufficient that the fallen yen would considerably impair Korean companies’ exports, the scenario might take a flip for the more serious if the present weakening of the yen continues till the top of this yr.

Industries like petroleum, metal making, equipment and cars, which have been conventional fields of competitors between Japan and Korea, are notably anticipated to really feel negatively impacts from a falling yen.

Traditionally, the speedy depreciation of the yen in opposition to the U.S. greenback within the early 2010s precipitated Korean export corporations’ hardship as a result of decline in international worth competitiveness.

“If the yen’s weakening continues long run, industries like petroleum, metal making, equipment and cars, might be adversely impacted. A delay of aggressive investments into native industries attributable to international financial uncertainty has additionally heightened a risk of injury to the metal and equipment industries,” Kim Chan-hee, analyst at Shinhan Monetary Funding, identified.

“Nonetheless, petroleum and vehicle sectors might see restricted damaging impacts from the falling yen, contemplating usually favorable international demand for these industries. The petroleum business may gain advantage from rising uncooked materials costs, whereas the car sector might see a gradual enchancment within the international provide disruption scenario,” the analyst added.