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| Containers are stacked to be shipped off at Busan Port, Wednesday. Yonhap |
By Yi Whan-woo
A toxic mixture of a weak Japanese yen and persistently strong U.S. dollar against the Korean won are posing challenges to the recovery of Korean exports, which have been in decline for the past eight consecutive months, analysts said Friday.
The country's outbound shipments came to $32.9 billion from June 1 to 20, up 5.3 percent from a year earlier, according to the Korea Customs Service (KCS).
It was the first time in 10 months that exports increased during the first 20 days of a month, fueling hope that overall monthly exports may rebound as well after marking an eight-month losing streak through May.
Analysts, however, said such hope could be threatened by the weak yen that has tumbled against the won for months, as the Bank of Japan's (BOJ) ultra-dovish monetary policy, in contrast to hawkish stances of other central banks, remains unchanged under its new governor Kazuo Ueda's leadership since April.
In its latest monetary policy meeting on June 16, the BOJ kept its short-term policy rate steady at minus 0.1 percent and also its 10-year bond yield at around zero percent.
"The Korean exporters may struggle to match cost competitiveness of it Japanese rivals, if the value of the yen keeps depreciating," said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI).
For years, it was considered virtually a norm that 100 yen be traded at 1,000 won or slightly higher.
But the Japanese currency retreated and stayed mainly in the level of 900 won per 100 yen this year. It even slid to as low as 897.49 won on June 19, marking the lowest level in eight years.
With regard to the dollar, the value of the yen has slid 8 percent since the beginning of the year and remains in the level of 140 yen per dollar.
Citing data from his institute, Lee noted Korea's export volume will shrink by 0.2 percentage points and their value will contract by 0.61 percentage points for every 1 percentage point decrease in the yen's value against the dollar.
He also noted the level of intensity in Korea's competition against Japan on export-focused manufacturing items was measured at 69.2, higher than 68.5 against the United States, 60.3 percent against Germany and 56 percent against China.
Under the circumstances, a strong dollar is also a minus factor for Korean exporters because it increases import costs of intermediary goods and eventually raises the prices of finished goods, according to Hana Institute of Finance researcher Kim Ji-hoon.
"It is no longer perceived as a norm that a strong dollar will bring more benefits to Korean exporters because the high cost of manufacturing will offset the revenue," Kim said.
The dollar has mostly remained in the 1,200 won level throughout June, weakening from its yearly high of the 1,400 level in 2022. The won closed at 1,304.2 per dollar, Friday, strengthening by 9.3 won from the previous day's close.
The value of the dollar, however, is still regarded high considering the 1,200 level was previously a psychological threshold, Kim noted.
