Yen below 900 won for first time in seven yearsThe Japanese yen’s value against the Korean won slipped below the 900 won mark for the first time in seven years and two months.
The yen closed at 898.56 won per yen on Tuesday, falling 3.73 won from the previous day.
The yen’s depreciation followed the downgrade of Japan’s national credit level from A+ to A by Fitch, one of three major international credit rating agencies on Monday.
The downgrade is expected to affect the currency’s popularity in the global market. If its value continues to decline, Korean exporters are likely to have a tougher time making profits abroad.
Relative appreciation of the won against the yen will make Korean goods comparatively more expensive in both the Japanese market and other foreign markets.
“As the currency competition intensifies, it will be hard to expect exports to lead the economy,” said Kang Jung-koo, a researcher at LG Economic Research Institute. “Because of adverse economic conditions and currency depreciations, Japan and euro zone countries are showing a tendency of curtailing exports from other countries.”
Lee Ju-yeol, governor of the Bank of Korea, mentioned the risks of the weakening yen on Tuesday.
“It is right that continuation of the yen’s weakening will have a negative impact on the Korean economy,” Lee said at a press conference on economic trends held at the central bank’s headquarters in central Seoul. “Although the economy is showing gradual improvements, factors remain that will curb recovery. The second quarter will be a critical time for economic recovery.”
Analysts are divided over the yen’s future.
Some analysts predict that the yen will remain in the 800 won range for a time being, but could slip lower than it is currently.
Others say the upcoming U.S. interest rate hike in the second half of the year will prevent the yen from depreciating further.
BY SONG SU-HYUN, CHO HYUN-SUK [email@example.com]