Japan’s weak yen policy may be good news for Japanese companies seeking export breakthroughs, but it is gradually becoming a nightmare for Korean companies directly competing with their Japanese peers overseas.
Automobiles and tech consumer products are two sectors in which Koreans will face tough competition with Japan, and a weak yen is forcing Korean exporters to revise down their sales and profit forecasts this year.
More than 80 of the 113 listed companies have revised down their target for operating profits this year due to the depreciation of the yen, according to data by FnGuide, an online securities information provider, and the Korea Exchange.
A total of 84 companies lowered their target for net profit, and 77 decreased their figures for sales.
Korean auto giant Hyundai Motor is expected to post an operating profit of some 2 trillion won in the first quarter of this year, down about 9 percent from the same period a year ago.
This expectation is down 2.4 percent from the automaker’s initial 2.3 trillion won forecast, according to FnGuide.
Also, operating profit of Dongkuk Steel, Korea’s third-largest steelmaker, has been lowered to 500 million won for the first quarter from the initial estimate of 2.1 billion won.
LG Display, Samsung Fine Chemicals and OCI also shifted down their forecasts.
Samsung Electronics, the world’s largest consumer electronics company, is one of the few Korean companies to raise quarterly expectations, predicting an operating profit of 8.4 trillion won, up from 7.9 trillion won.
Given Korea’s heavy dependence on exports and limited growth opportunity through domestic consumption, Japan’s weak yen policy through monetary easing has caused a stir among local policymakers and economists.
Japanese products in the tech, automotive, petrochemical and steel industries are in direct competition with Korean brands overseas. More than half of Korean products shipped to global markets overlap with Japan for competition, according to the Korea International Trade Association.
Even though the Korean won has weakened, Japan’s weak yen policy will persist until the world’s third-largest economy achieves its 2 percent inflation target and overcomes its prolonged slump that has lingered for about two decades, analysts said.
This, in turn, will pose a downside risk for the Korean financial market where foreign investors hold the liquidity key.
Foreign capital outflow has contributed to the depreciation of the won to the dollar, said June Park at Meritz Securities.
“A weak yen is likely to negatively affect Korea,” Park said. “Even though signs show that the U.S. and China are heading for recovery, this will have limited effect on the Korean financial market (due to Japan’s weak yen).”
By Park Hyong-ki (
hkp@heraldcorp.com)
