South Korea’s trade volume with Japan has seen a decline recently on the back of a weak yen and Seoul’s reduced reliance on importing industrial parts and materials from the country, according to the Korea International Trade Association.
KITA said trade volume between the two nations had reached $42.9 billion in the first half of this year to record a 9.8 percent drop from the same period last year. The figure is the lowest since 2009, in the midst of the global financial crisis, when trade volume stood at $31.9 billion.
Last year, the volume posted an 8.2 percent drop, while in 2012 it fell 4.5 percent from the year before.
“The trade volume has been falling on account of a weak yen and Korea’s reduced reliance on Japanese parts and materials, and this trend is expected to continue down the road,” said Myung Jin-ho, a senior researcher at KITA’s Institute for International Trade.
Japan and Korea have maintained a strong trade partnership for several decades due to their geographical proximity and economic similarities. Since the two normalized diplomatic relations in 1965, the bilateral trade volume has risen from $220 million to $95 billion last year. In particular, local companies have heavily relied on Japanese imports for industrial parts and materials.
But as more firms are seeking to diversify their import destinations to include those such as China and localize their technologies, parts imports from Japan have dropped significantly. In the first quarter of this year, the portion of parts from Japan accounted for an all-time low of 18 percent of all parts imports. The figure represents a marked decline from the 50 percent tallied two decades ago, KITA said.
Meanwhile, South Korea has also been diversifying its export destinations by signing free trade agreements with more countries, including the United States, the European Union, and a number of Asian countries.
“The trade volume with ASEAN countries, which are increasingly emerging as global manufacturing bases, has been rapidly growing,” Myung said. “Large companies such as Samsung Electronics export parts to factories located in these nations, and the finished goods are then imported back to South Korea.”
