Japan’s weak currency policy driven by its monetary stimulus is beginning to take a toll on Korean exports to the world’s third largest economy, according to data from the Korea International Trade Association.
The growth rate of outbound shipments to Japan from Korea has been declining rapidly with the portion of Korean exports to Japan compared with the total number of Korea’s overall exports also shrinking at a fast pace.
Industry data showed that the growth rate has been in negative territory over the last seven months between February and August this year.
Korean exports to Japan dropped about 17 percent in February this year compared with a year ago, with the rate continuing to dip more than 13 percent in August, according to the latest export data.
This marks the second longest losing streak in export growth following Korea’s 12 straight months of declining exports to the world’s third largest economy between November 2008 and October 2009 amid the global financial crisis.
Korean exports to Japan accounted for about 5 percent, dropping from 7.7 percent early this year.
Its portion has been sliding below the 6 percent threshold since March this year as Japan’s Prime Minister Shinzo Abe aggressively pursued monetary and fiscal stimulus, so-called Abenomics, to overcome deflation and two decades of a economic slump.
Its policy also supported a weak yen to boost Japan’s exports to revive its economy.
Japan’s exports in comparison to that of Korea have been in positive territory, with a export growth rate increasing as high as 15 percent during the same period.
The dollar-yen reached a 52-week high of 103.7 yen, achieving its desire to weaken the currency above the 100-yen threshold.
The won has also strengthened in the face of Japan’s weak currency drive, with the won-yen exchange rate reaching around 1,080 won this month from 1,160 won early this year. A strong won makes Korean products more expensive, and thus lose competitive advantage.
A weak yen has adversely affected Korean industries such as steal, petrochemical, IT and automobiles.
By Park Hyong-ki (email@example.com