Weakness in yen is just beginning, says BOK

Weakness in the yen has only just begun and will continue for a “long time,” which will have an impact on Korean electronics, automobile and steelmakers, Bank of Korea Governor Kim Choong-soo said.

“Korea will seek a way to counter the weak yen, including financial support for the most vulnerable exporters,” Kim said in a lecture in Chuncheon, northeast of Seoul, yesterday.

“The weak yen will continue for a long time, so we’re cautiously and closely looking at the change.”

The slide in Japan’s currency is adding to friction between the two nations, already at odds over a territorial dispute and Japanese politicians visiting a shrine seen in Asia as a symbol of wartime aggression.

Korea this month unveiled a 17.3 trillion won ($15.4 billion) extra budget to stimulate growth as the nation wrestles with elevated household debt and weakness in export demand. Out of the total extra budget, 12 trillion won will be used for filling up tax shortfalls.

“The phenomenon of a weak yen has only started now, even though many people say the weak yen is already affecting the Korean economy,” Kim said.

While a growth revival in Japan could lead to a stronger currency, so far that nation is “just printing money,” Kim said. The nation needs structural and fiscal changes for economic success, he said, which have yet to be seen.

The Korean central bank will be announcing the first quarter performance of the Korean economy later today.

By Lee Ho-jeong, Bloomberg [ojlee82@joongang.co.kr]