Weak yen incurred $10 billion in losses in Korean exports in H1: analysis

The Japanese yen fell to an 8-year low against the South Korean won on Wednesday, raising concerns about the deteriorating competitiveness of Korean exports.

According to data from Hana Bank, the Japanese currency fell to 897.29 won ($0.69) per 100 yen as of 3:30 p.m. on Wednesday. It is the first time that the yen hit the 800 won range since June 25 in 2015.

The weak yen has become a global trend this year. The yen fell to the upper 151 yen range against the U.S. dollar last year and remains at 145 yen range this year.

The weak value comes as the Bank of Japan has been sticking to a low interest rate policy. The Japanese government is also refraining from direct intervention in the foreign currency market.

Market experts noted that the record-low yen could threaten the Korean economy, which has been showing signs of a rebound in exports. Japanese companies, however, are expanding exports on the back of the weak yen.

A one percentage point fall in the yen has lowered Korea’s export growth rate by 0.61 percentage points on average, according to the joint analysis of Maeil Business Newspaper and The Korea Economic Research Institute (KERI), which tracked the impacts of the dollar-yen rates on Korean exports from 2005 to 2022.

Based on the calculations, Korean exports were estimated to have declined by $10.05 billion in the first half of this year due to the weak yen.

The yen depreciation against the U.S. dollar has been more rapid compared to the won. The Korean exports, in the absence of the weaker yen value, would have amounted to $317.3 billion.

“For Korea to mitigate the impact of the weak yen, international coordination is necessary, with greater support for the sectors that are expected to face competition with Japan,” said Choo Gwang-ho, economic policy division head at the KERI.