With the weak yen trend expected to continue, local think tanks are issuing a negative outlook for exports for the second half of the year.
“The rise in the yen against the dollar above the psychological mark of 100 last week, again in a month, is considered a trend among market watchers, not a temporary jump,” said Chung Sung-choon from the Korea Institute for International Economic Policy.
The movement toward devaluation of the yen regained steam from the end of June when the global financial market started to stabilize from rising fear over a possible withdrawal of the U.S. government from its fiscal and monetary stimulus measures in the near future, he noted.
Samsung Economic Research Institute also projected the yen would move above 100 against the dollar, saying that Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party will likely win the elections in the upper house of parliament on July 21 and drive up its radical economic policies, dubbed Abenomics, including the devaluation of the yen.
Regarding the impact of a weak yen, LG Economic Research Institute said industries in competition with their Japanese counterparts, including steel, petrochemicals, machinery and autos, could feel the pinch the most.
“Such industries will be impacted by the second wave of the weak yen from the latter part of this year as Japanese exporters will cut their product prices a few months later when the trend continues,” said a recent report from the LG Economic Research Institute.
Exports of some of the nation’s key industries have already been affected by the price cut of Japanese goods in the global markets, following the first wave of the weak yen, which lasted from late last year until May. According to industry sources, the global market share of local steel makers fell 4 percent in the first quarter, while domestic petrochemical exporters also saw their global market share drop by 1 percent.
In contrast to rising concerns from the private sector over the impact of the weak yen on Korean exports, some government authorities stayed upbeat about the outlook for Korean exports, based on an optimistic outlook for the recovery of the U.S. economy.
At the end of June, the Ministry of Strategy and Finance boosted the nation’s 2013 growth outlook to 2.7 percent from an earlier estimate of 2.3 percent, citing its fiscal stimulus package and the modest recovery of the global economy.
It added that the impact of the first wave of the weak yen on the nation’s economy, including exports, was limited in the first half, claiming that despite devaluation of the yen, the won against the dollar also fell and offset the fallout of the weak yen in competition for exports.
“Although the impact of the first weak yen trend on Korean exports was limited, the government cannot sit back anymore without any countermeasures if the return of the weak yen is prolonged and Japanese exporters cut their product prices again,” Lee Ji-sun from LGERI said. Lee pointed out that 56.8 percent of Korean export items currently compete with Japanese goods in the global market.
By Seo Jee-yeon (
jyseo@heraldcorp.com )
