The weakness of the yen has drawn concern from South Korean exporters, especially carmakers such as Hyundai Motor, as they struggle to compete against Japanese rivals in overseas markets.
South Korean exports have so far survived the won hitting a nine-year high against the yen of Won779.55 per Y100. In January, South Korea’s exports grew 21.4 per cent year-on-year to $28.2bn (€21.7bn, £14.3bn).
But concerns over the potential damage are growing among Korean exporters who are more worried about the weak yen than the weak dollar, as they vie with Japanese manufacturers in many key areas such as electronics, cars and shipbuilding.
A recent report by the Korea International Trade Association estimated a 10 per cent weakening in the yen would cause a loss of $10.7bn in exports annually.
“Korean companies are taking the won/yen exchange rate very seriously, with CEOs of big conglomerates repeatedly voicing concerns over the cross rate,” said Shin Seung-kwan, a researcher at the trade group.
The weak yen has raised questions about its possible impact on exporters elsewhere in Asia. Malaysia’s ringgit, which in 2005 began trading against a basket of currencies including the yen, for example, is now nearing a 10-year high against the dollar, affecting its exporters’ competitiveness in international markets.
“In general I suspect a lot of Asian countries are unhappy with the yen’s weakness but are reluctant to voice concerns for fear of increasing global focus on the issue of Asian surpluses in general,” said Adrian Foster, a regional economist at Dresdner Kleinwort in Beijing.
But South Korea is the Asian economy that competes most directly with Japan’s in the international market and thus the one suffering most from a weak yen. Among the hardest hit is the automobile sector with South Korea’s market share in the US sliding from 8.2 per cent in 2004 to 6.7 per cent in 2006, while Japan’s rose from 26.3 per cent to 31.5 per cent. Hyundai, South Korea’s biggest automaker, reported a 35 per cent drop in its 2006 profits.