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[Editorial] Yen and export outlook

[Editorial] Yen and export outlook

Private institutions need to toe the line

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Published : 2014-01-03 20:36
Updated : 2014-01-03 20:36

Exports grew at a snail’s pace, at 2.2 percent from 2012 to 2013. Yet, their value was the largest ever, at $559.7 billion. On the other hand, imports declined from the previous year, by a small margin of 0.8 percent, to $515.5 billion.

The end result was a trade surplus of $44.2 billion, an amount that replaced the previous high of $41.2 billion attained in 2010.

Exports and imports, when put together, surpassed $1 trillion for the third consecutive year ― an accomplishment confirming again that Korea was among the leading trade powerhouses in the world.

All corporations engaged in external trade deserved a pat on the back for attaining what was called a “triple crown” ― the largest exports, the largest trade surplus and more than $1 trillion in trade for the third consecutive year. Of course, due credit should be given to the administration, which helped facilitate exports and imports.

Riding on the 2013 performance, both the administration and the exporting industry have high expectations for this year, too, though the trade surplus may be reduced. The administration estimates exports to grow 6.4 percent to $595.5 billion and imports to surge 9 percent to $562 billion, producing a surplus of $33.5 billion.

Few would say the goals are so high that they are unattainable. Still, caution is advised, given that pressure is mounting on the Korean currency to strengthen against the U.S. dollar at a time when the Japanese yen continues to weaken.

Such pressure is unavoidable when a trade surplus, together with a current account surplus, is on the rise. Moreover, the United States and other countries, which suspect that the Korean won is substantially undervalued, are vociferous in their demand that Korea stop intervening in the foreign exchange market.

No less worrying is that the yen is weakening against the dollar, accelerating its fall against the won. A weak yen may cause much pain to Korean exporters, many of whose products compete against those made in Japan, ranging from automobiles and steel products to ships and petrochemicals.

Korean corporations have already experienced the impact of a weak yen on their exports. Their shipments to Japan, which gained 7.6 percent year-on-year in January 2013, recorded decreases for 10 consecutive months, and probably in December as well, for which figures for bilateral trade are yet to be made available.

The yen fell to a five-year low against the won when the value of 100 yen fell below 1,000 won before closing at 1,002.8 won on Dec. 30. It also meant a steep 33 percent drop over two years.

One way to moderate the won’s rise against both the dollar and the yen, without being suspected of intervening in the market, is for the administration to help boost domestic demand and increase imports. For their part, corporations have an opportunity to spend more on capital goods and upgrade their production facilities. At the same time, they will have to spend more on research and development and improve the quality of their products if they are to overcome the strengthening won.

It is of no use to complain about the won’s gain. If their memory is short, they should be reminded that the won’s pre-Asian meltdown exchange rate hovered around 770 won per dollar, well below the 1,050 won level now.

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