Korea’s newly appointed finance minister, Hyun Oh-seok, revived his nation’s concerns over weakness in the yen and said that the Group of 20 nations should revisit the issue.
“Japan’s expansionary policies are having various ripple effects on many countries,” Hyun, 62, told reporters on Saturday in Bundang, Gyeonggi Province on his second day as finance chief. “The yen is depreciating while the won is gaining and this is flashing a red light for Korea’s exports.”
Japan central bank Governor Haruhiko Kuroda is poised to boost monetary easing, expanding a campaign to defeat deflation that triggered an 11 percent decline in the yen against the dollar in the past three months. South Korea expressed concerns about the currency’s slide before and after last month’s meeting of the G20 in Moscow, where that organization refrained from criticizing Japanese policies.
“The South Korean government is well aware that the negative influence on the economy from the yen’s depreciation is not small,” said Lee Sang-jae, a Seoul-based economist at Hyundai Securities Co. The nations are in “a competing relationship, not a complementary one,” said Lee.
South Korean officials are concerned at the yen’s slide because the nation depends on exports for economic growth and competes in overseas markets with Japanese manufacturers of cars and electronics. At the Moscow meeting, G20 nations pledged not “to target our exchange rates for competitive purposes,” without any censure of Japan for the yen’s decline.
Japan’s government says it is not targeting the yen, with declines in the currency a side-effect of efforts to spur a sustained recovery in the world’s third-biggest economy.
Officials have pushed back at international criticism of Japanese policies, with Deputy Economy Minister Yasutoshi Nishimura alleging in an interview on Jan. 24 that South Korea attempts to manage its own currency.
“While the yen is traded completely openly, there may be intervention on the won and the country has fixed regulations on foreign investments,” he said.
The International Monetary Fund said in October 2012 that South Korea was one of several Asian economies whose currencies would strengthen with a “more desirable” set of policies. In 2011, the fund said that the won’s real effective exchange rate was undervalued by about 10 percent.
“While we will do what we can, we need international cooperation to deal with the weak-yen problem,” Hyun told reporters. “This should be discussed at the G-20.”
Hyun’s comments came as he toured markets in Seoul and Bundang, checking on prices of goods after the new government under President Park Geun-hye pledged efforts to aid low income earners. Appointed by Park on March 22, Hyun said in his inaugural speech he would use “all possible measures to speed the economic recovery,” and indicated that government support would come as early as this month.
“We need to factor in the yen problem as we think about policy measures, as exports and domestic demand are two big pillars of our economy,” Hyun said on March 23. Stabilizing foreign-exchange markets should always be an important part of government policy, since currency moves can be a source of shocks, he said.
