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Japan’s trade measures to hit half of big corporations

Aug 20,2019
Half of Korea’s largest companies will be negatively affected by Tokyo’s export restrictions, according to a survey by a private think tank.

The Korea Economic Research Institute (KERI), which is under the Federation of Korean Industries (FKI), said Monday that 51.6 percent of companies it surveyed responded that the measures taken by Japan will weigh on business activities.

According to the survey of 153 of the country’s top 1,000 companies, businesses expect revenue this year to fall by an average of 2.8 percent due to the export restriction measures.

Companies in the machinery industry were most pessimistic about the outlook, anticipating a 13.6 percent fall in annual revenue. Petroleum companies predict a 7 percent decline. Companies in the semiconductor industry expect a drop of 6.6 percent in revenue, according to the survey results.

KERI said annual revenue of companies saying they will be affected by the measures is expected to fall by an average of 5.7 percent. Annual operating profit of the total surveyed companies is expected to fall 1.9 percent on average due to Japan’s measures.

The semiconductor industry expects a decline of 5.1 percent in annual operating profit.

“It is possible that some companies could record a loss,” said Yoo Hwan-ik, a director at KERI, explaining that last year’s average operating profit growth for the top 1,000 companies was 5.3 percent.

The survey comes as the trade row between Korea and Japan is set to become drawn out.

Tokyo tightened exports last month of three key industrial materials essential in semiconductor and display production. Tokyo also decided to drop Korea from its list of countries receiving preferential trade status, which will tighten exports on nearly 1,200 categories of products from Aug. 28. Korea retaliated by removing Tokyo from its list of preferential trade partners earlier this month.

In terms of a response to Japan’s measures, the surveyed companies first chose support for alternative import routes followed by financial support for domestic production of materials affected by the restrictions.

The government has said it will commit 7.8 trillion won ($6.5 billion) for local development of industrial materials and equipment over the next seven years. The government is targeting the establishment by 2024 of a stable supply of 100 key industrial materials affected by Japan’s restrictions.

Meanwhile, 40.1 percent picked diplomatic resolution as the needed measure to resolve the dispute.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]


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