Weaker Yen
The Korean government is going to include its stance and concerns regarding the potential damage from Japan’s quantitative easing policy in a communiqué at the G20 Summit scheduled for Nov. 15 and 16 in Australia. However, the process is likely to face difficulties with both Japan and Europe following the United States’ termination of the six-year-long quantitative easing.
In fact, Korea had raised the same issue during the G20 Financial Ministers and Central Governors Meeting in April last year. Nevertheless, only a sentence like “We have reconfirmed our duty not to use the exchange rate as a weapon for unfair trade profits” had been inserted into the communiqué at that time. As such, the government is going to strengthen its offensive at this time.
The Japanese yen has depreciated at a fast pace since the Bank of Japan’s October 31 announcement about additional QE on to reach 115.51 yen per U.S. dollar as of 1:30 pm on Nov. 6. The rate was the highest since Sept. 28, 2007, when one U.S. dollar equaled 115.56 yen. The weak yen was accelerated by Bank of Japan governor Haruhiko Kuroda’s remarks at the preceding that he would do anything to meet the 2 percent inflation goal.
The won-dollar exchange rate also rose to as high as 1,096.8 won per U.S. dollar during the session, recording a 13-month high, and closed at 1,083.8 won. The spike was led by the depreciation of the yen against the U.S. dollar, the possibility of an earlier-than-expected interest rate hike after the Republican Party’s landslide victory during the off-year election, and signs of additional QE by the European Central Bank (ECB). Deputy Minister of Strategy and Finance Ju Hyung-hwan added fuel to the fire by saying, “The value of the won will be controlled to move with that of the yen.”