Two-way trade between South Korea and Japan has decreased for three years in a row, amid frosty relations and the weakening of the Japanese yen against the Korean won, data showed Wednesday.
According to trade figures posted by Korea Trade-Investment Promotion Agency (KOTRA), exports to the island nation fell 2.2 percent on-year in 2012, plunged 10.7 percent in the following year and is down 4.6 percent in the first nine months of this year.
Imports from Japan were also down in the same period, with inbound goods traffic dropping 5.8 percent in 2012, 6.7 percent in 2013 and 11.1 percent in January-September of 2014.
The drops mark the first time ever that bilateral trade has decreased for three consecutive years.
Related to the decline in exports, market watchers such as the Korea Center for International Finance (KCIF), said the weak yen that hurts the price competitiveness of South Korean-made goods in the global market, is the main culprit.
In December of 2012, the won-yen exchange rate was at 1,280 won to 100 yen, but stood at 951 won to 100 yen, as of late last month, after Tokyo announced it will expand its monetary stimulus program aimed at fueling growth.
Japan's stimulus program is centered on injecting more liquidity into the market and measures taken by Japan's public pension fund to invest abroad.
"There is speculation that the Korean won will appreciate to 900 won per 100 yen by year's end or early next year," KCIF said.
It said the weakening of the Japanese currency comes at a time when South Korean exporters are facing tough times.
In addition, cool South Korea-Japan relations triggered by historical and territorial disputes between the two nations, has played a part in hurting trade, as well as sluggish economic conditions at home and domestic company making headway in industrial materials and parts and sapped demand.
Imports of steel products from Japan up till September of this year, compared to the same nine month period a year earlier, witnessed a 14.3 percent drop. Purchases of industrial electronic products and precision manufacturing machinery were down 21.7 percent and 32.3 percent, respectively.
"South Korean companies are making products and parts that are more high-tech and can compete with Japanese imports that are reducing demand," a market watcher said. Direct investment by Japanese companies into South Korea is further reducing import demand. (Yonhap)
