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Comparison of Trade Between Korea and Japan Since a Recent Weak Yen

Author HyunSoo, Shin Date 2014.03.18 Issue No 581

Despite the drastically weakened yen since the inauguration of Abe Administration, Japans trade deficit hit an all- time high. In contrast, Koreas trade surplus reached record high, which is the trend unlike the periods of a low yen in the past.


Although Japans export (yen-basis) has recovered thanks to a low yen, the trade balance of Japan is running rather a widened deficit on a yen basis, not just because the import of raw materials such as energy resources has been sharply grown, but also because Japans economic recovery is leading to an increase in import.


In addition to the unrecovered export volume despite an improved price competitiveness of Japans product caused by a weak yen, a deteriorated competitiveness of Japanese electronics industry and its sluggish export to China, have aggravated a dramatic decline in the Japans exports on a dollar basis.


On the other hand, Koreas export is maintaining its recovery trend thanks to an enhanced competitiveness of leading export items such as semiconductor, mobile phone, display, automobile and shipbuilding.


Unlike the past, there are occurring a slump in Japans export (dollar-basis) and a continuing recovery trend of Koreas export even on a weak yen, because the impact of a weak yen has declined due to not just the narrowed gap between Korea and Japan in terms of competitiveness but also the expansion in the overseas production of Japanese enterprises.


Changes in trade environment in China such as development of Chinese electric and electronic industry, shift in growth pattern and growing anti- Japanese sentiment also have had an effect on the export of Korea and Japan to China on a low yen.


However, Japanese enterprises are witnessing remarkable increase in their profits owing to a sharply weakened yen. For this reason, if a trend of low yen prolongs, it is concerned that there would be a negative effect on the export of Korean enterprises, once Japanese enterprises decrease its export price more and expand its investment.