Capital Exchange
It has been pointed out that a yen-dollar exchange rate going extremes would have a limited impact at best on Korean industries while the weak yen is more likely to deal a blow to the Japanese economy.
Securities analysts’ consensus is that a rising yen-dollar exchange rate affects the steel, automobile, mobile phone, semiconductor and IT component industries of Korea the most. According to them, the steel industry’s operating profits would decline by 4.4% when the exchange rate went up from 90 yen to 110 yen per US dollar while those of the automobile, mobile phone and semiconductor and IT component sectors decreased by 4.2%, 2.3% and 0.2%. Only the chemical industry is expected to increase its business profits by 2.6%.
Still, economists are saying that the weak yen trend will have a less-than-worried adverse effect on the industries even on the assumption that the yen-dollar rate reaches as high as 110 yen per US dollar, which is regarded as an extreme level. “Actually, even an exchange rate of over 95 yen per dollar is considered overheated and thus it’s right to say that 110 yen is something impossible,” said Samsung Securities analysts Kim Yong-koo, adding, “Even in that case, domestic industries’ operating profits fall by just 4% and it isn’t such a meaningful figure.”
A continuing weak yen trend could negatively affect the trade balance of Japan, though. “For Japan, the energy imports account for approximately 30% of the total imports, which means the weak yen could be a disadvantageous factor for it with the oil prices on the rise,” the analyst went on, “The Abenomics’ ultimate goal can’t be met, even though its exports increase, if the trade balance deteriorates due to an increasing dependence on imported energy.”
The researcher forecast that yen-dollar exchange rates would be continuing to rise for a while, though not so steeply. “To win the House of Councilors election scheduled for July this year, Prime Minister Shinzo Abe has no option but to resort to expansionary monetary policy,” he said, continuing, “Although the exchange rate is likely to go up, a steep rise could lead to situations more unfavorable for Japan than for Korea.”