Korea’s travel account deficit highest since 2011

Korea saw its travel account deficit surge to its highest in seven fiscal quarters in the months between January and March this year due to the rapid depreciation of the Japanese yen, according to the Bank of Korea on Tuesday.

The shortfall reached some $2 billion in the first quarter, the highest since the second quarter of 2011 when the travel deficit under the services account in the balance of payments hit almost $2.26 billion.

This is primarily due to the increasing number of Koreans traveling to Japan, while the country is seeing a decreasing number of inbound tourists from Japan on a weaker yen.

A strong won against the Japanese yen makes it cheaper for Koreans to visit Japan, and more expensive for the Japanese to travel to Korea.

The tides have turned in Korea’s travel industry, which used to see a high number of Japanese tourists on the back of a strong yen and the popularity of the so-called Korean Wave, as the world’s third-largest economy has sought to change its monetary regime by supporting a weaker yen to revive its economy.

The Korean won has gained about 20 percent against the yen since October, adversely affecting not only the travel industry but also other sectors such as automobiles, electronics and steel.

Koreans spent about $5.2 billion on overseas travel in the first quarter of 2013, up about 6 percent from a year ago, while tourists’ spending decreased by 3.8 percent to $3.1 billion in the same period.

By Park Hyong-ki (hkp@heraldcorp.com)