Exporters Keep Wary Eye on Falling Yen

The yen's continuing weakness against the U.S. dollar is raising concerns among Korean exporters that they will lose markets to their increasingly more competitive Japanese rivals.

The effect of a weaker yen would not be very serious in the short run, sources from the business community said Monday, because the Korean won has also declined against the dollar, keeping pace with the yen. But, they said, if the yen remains low in the second half of the year, while the won gains strength, it would harm local firms' competitive positions.

Korean electronics, steel, shipbuilding and automobile companies, which have been in tight races with their Japanese counterparts, have not seen big losses from the low yen since the won has remained weak.

Hyundai Heavy Industries and Samsung Heavy Industries, major local shipbuilders, reported no problems in securing contracts. Daewoo Heavy Industries & Machinery said it benefited from the weak yen because it depends on Japanese parts for its finished products.

Samsung Electronics said that global competition with Japanese electronics firms has almost faded in semiconductor markets, since Japanese companies withdrew from the dynamic random access memory business.

But, it is possible that mounting trade surpluses and expanding overseas investment could strengthen the won during the second half of the year, according to analysts.

"Korea and Japan had in common 24 of 50 major export items at the end of last year, though rivalry between the two countries has weakened," an official at the Korea International Trade Association said.

According to the association, if the yen were to shed an additional 10 percent against the dollar, Korea's exports would decline $2.7 billion a year. If the Japanese currency remains low for six months or longer, the local machinery companies would be hit hardest in world markets. Braun tubes, automobiles and tires also were seen as vulnerable.

by Sunny Yang