South Korea is busy crafting measures to deal with the impact of the continued descent of the Japanese yen against the dollar amid worries that its exporters will likely take the brunt of such currency risks, government officials said Friday.
The move comes as the yen-dollar exchange rates earlier breached the 100 mark, raising concerns that the weak yen will take its toll on the South Korean economy whose companies have to compete with Japanese rivals in many areas on the global stage.
The weak yen is supported by so-called Abenomics -- a mixture of aggressive monetary and fiscal policies preached by its Prime Minister Shinzo Abe. The Japanese currency has weakened about 22 percent to the greenback since September.
"We are closely watching the yen's movement as the yen-dollar exchange rates surpassed the 100 mark," a high-ranking finance ministry official said on condition of anonymity. "In particular, we are considering diverse responses to deal with possible damage from the weak yen."
The official, however, cautioned that the government could lose international trust if it resorts to market responses whenever volatility intensifies.
"Rather than any market response, the measures under consideration will mostly consist of support for small and medium-sized companies vulnerable to the falling yen," he noted.
Finance Minister Hyun Oh-seok also suggested a similar cautious stance. In a meeting with reporters on Thursday, he said that the government is "concerned" about the yen but it is "not desirable" to send any particular signals to the currency market.
Market watchers expected that the government will continue what it calls "smooth operation" to deal with currency fluctuations rather than any large-scale interventions.
The government still remains on alert. In an apparent verbal intervention on Wednesday, the finance ministry warned against one-sided herd behavior in the market.
The main focus will be protecting local exporters who have to compete with Japanese rivals armed with better price competitiveness from the yen's fall. South Korea's exports to Japan plunged 18.2 percent on-year in March.
A local think tank worried that South Korea's exports will shrink about 2 percent on-year if the yen-dollar exchange rates surpass the 100 mark. (Yonhap News)
