Martial Arts: "Even if the USD-KRW Exchange Rate Rises by 10%, South Korea's Exports Decrease by Only 0.1%"

"Won-Yen Synchronization Deepens... Impact on Korean Exports Expected to Be Limited"

There is a claim that the depreciation of the yen and the resulting decrease in its value will not have a significant negative impact on South Korea's exports.

The Korea International Trade Association's International Trade and Commerce Research Institute stated this on the 21st in a report titled "The Impact of Yen Exchange Rate Fluctuations on Our Exports."

As the yen-dollar exchange rate rises, the value of the yen decreases. This can increase the competitiveness of Japanese products competing with South Korea, which is unfavorable for Korean exports.

The survey results showed that if the yen-dollar exchange rate rises by 10%, domestic export unit prices fall by 0.12%, export volume increases by 0.02%, and export value decreases by 0.1%.

The KITA explained, "When the yen-dollar exchange rate rises, the dollar-denominated price of Japanese products decreases, inducing a price drop in competing Korean products and increasing export volume."

On the 14th, an employee is organizing dollars and yen at the Hana Bank Counterfeit Response Center in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Notably, KITA forecasted that despite the yen being at an all-time low, the intensified won-yen synchronization means the impact on Korean exports will not be significant.

KITA stated, "Since the second half of 2014, won-yen synchronization has become prominent, and especially since 2021, the movements of the two exchange rates have shown very similar patterns not only in direction but also in magnitude. Over the past decade, the export competition between Korea and Japan in the Chinese and U.S. import markets has been easing."

KITA suggested expanding research and development (R&D) investments focusing on items with high Korea-Japan competition in the global market.

Industries with high Korea-Japan competition include wireless communication devices and parts, and ships. Korean exports in these sectors decreased by 16.7% and 10.4%, respectively, over five years.

The export impact on items with comparative advantage was smaller than on those with comparative disadvantage. For example, semiconductors have a Korea-Japan export competition index exceeding the industry average (0.458 last year) and have seen intensified competition over the past five years. However, as a relatively high comparative advantage item, South Korea's semiconductor exports to the world increased by an average of 12.5% from 2017 to 2022.

Senior Researcher Kang Naeyeong of KITA said, "To prevent contraction in exports of South Korea's key industries amid the yen's weakening trend, improving comparative advantage through productivity enhancement is crucial. In particular, efforts to strengthen export support such as R&D focusing on items with high export competition with Japan are necessary."

Senior Researcher Kang added, "While maintaining competitiveness in intermediate goods through high value-added materials and parts, it is important to actively utilize existing Free Trade Agreements (FTAs) to enhance the price competitiveness of domestic products and promote export expansion."

This content was produced with the assistance of AI translation services.