ⓒ JoongAng Ilbo / JoongAng Ilbo Japanese version2022.09.13 16:48
The formula of the “yen depreciation air raid” of Korean export companies is collapsing. The yen plunged to the 140 yen level to the US dollar this year, but South Korean exporters have been unable to realize the effects of the yen’s depreciation more than in the past. On the contrary, there are voices mixed with self-deprecation, saying, “I’m even more worried about the fact that exports have decreased due to the economic downturn.”
A weaker yen has traditionally been a negative signal for exporters. Even just seven or eight years ago, a relatively low value of the yen would have dealt a heavy blow as the price competitiveness of Korean exports, which competed with the yen, would drop. The depreciation of the yen was a fatal blow to the petrochemical, automobile and steel industries, which had to compete with Japanese companies in the global market. There was also an analysis that Hyundai Motor’s exports would drop by 0.96% (approximately 10,000 units) if the value of the yen fell by 1%.
2012 is representative. The yen depreciation policy led by Prime Minister Shinzo Abe at the time led to a clear decline in South Korean exports as Japanese companies gained price competitiveness. In 2012, the rate of increase in exports from the previous year was 4.4%, but in 2014 after the weak yen policy, it remained at 2.3%. At that time, the value of the yen was so low that the dollar was worth 120.40 yen.
This time, however, the depreciation of the yen has not exerted much force. According to the export and import trends announced by the Ministry of Trade, Industry and Energy, last month’s exports recorded 56.67 billion dollars, up 6.6 percent from the same period last year. The trade balance is negative due to a large increase in energy imports.
South Korean companies also seem to be unconcerned about the yen’s depreciation. The petrochemical industry is a prime example. An official from a major South Korean chemical company said, “Economic stagnation is more scary than a weak yen. The chemical industry is sensitive to the economy, but orders have been declining this year, which worries me.” In fact, the Korea International Trade Association predicted that this year’s petrochemical exports will fall from $30.5 billion in the first half to $29.9 billion in the second half. Hong Ji-sang, a researcher at the Korea International Trade Association, said, “In the case of petrochemicals, the export business is expected to deteriorate due to the oversupply caused by the large-scale expansion.”
◇ Hyundai to increase eco-car sales in the US
Automobiles that compete directly with Japanese brands have not been greatly affected by the weaker yen. The atmosphere in the automobile industry is so good that exports cannot catch up with the supply shortage of semiconductors. Hyundai Motor Group sold 135,526 units in the United States last month, setting a new record for monthly sales. Sales of eco-cars are driving the improvement in sales, with sales of electric vehicles more than doubling.
In contrast, Japanese automakers saw their sales fall during the same period. Toyota posted a negative growth of 9.8% and Honda posted a negative growth of 37.7%. The main reason why these manufacturers are unable to exert their strength is that they have not been able to quickly adapt to the rapidly changing industrial structure. The Japanese auto industry, which has led the way in hybrids, has struggled to stand out in the electric vehicle market. Toyota also declared a recall of its first electric vehicle, the bZ4X, after a tire came off while driving. An automobile industry insider commented, “Japanese cars were unable to show their strength in the eco-car war, and the recession due to the depreciation of the yen has become an old story.”
The steel industry is also unable to experience the recession due to the depreciation of the yen. An industry insider said, “We pay for imported raw materials in dollars, so the stronger dollar is more of a concern than the weaker yen.” Japanese steel companies have been unable to enjoy the effects of the weaker yen. The Japan Iron and Steel Daily recently explained that although exports did not increase significantly due to the fall in international steel prices since May, the price of imported raw materials has risen and the depreciation of the yen has rather had a negative impact. The Nihon Keizai Shimbun also reported that Korean companies could not feel the threat of a weaker yen.
◇ “Improve service balance to overcome the threat of yen depreciation”
In addition, experts say that the trade dispute between South Korea and Japan in 2018 has become a “preventive injection.” The explanation is that the company has strengthened its constitution by actively promoting domestic production and diversifying its business partners.
However, there is also the view that countermeasures should be taken because the depreciation of the yen will have a negative impact on South Korean companies in the long term. “If the weak yen continues for a prolonged period, oil, steel, and automobiles, which are highly competitive with Japan, are likely to suffer damage,” said Kim Chang-hee, a researcher at Shinhan Financial Investment. Kang Seong-jin, a professor of economics at Korea University, said, “We feel the weaker yen is a threat because we have traditionally focused on the manufacturing industry. Now is the time to advance the industrial structure so that we can improve the balance of services such as travel and finance.” advised.