Exchange rates dip below those of 1997
The Japanese yen’s steep fall next to the won may pose a threat to the Korean economy. The rate fell to 799.66 won per 100 yen on the morning of October 2; this rate can be compared to a rate of 800.16 won per 100 yen recorded on November 17, 1997, when the nation was in the throes of a large-scale financial crisis. Some observers say that the won-yen rate temporarily declined as domestic exporters have substantially pushed products onto the market ahead of Chuseok, the largest national holiday. Others, however, suggest that the weak yen will continue for the time being. Gu Gil-mo, a dealer with the Korea Exchange Bank (KEB), predicted, "Since the launch of Abe’s administration, the possibility that Japan will raise the key interest rate is low due to a slower-than-expected economic recovery. In consequence, the yen is likely to maintain its weak position." Go Yu-seon, an official of Daewoo Securities, said, "Among the world’s major currencies, the yen has been relatively undervalued. Even if the won-yen rate doesn’t decline sharply, it is expected to remain weak for the present."Some have raised concerns that the weaker yen will threaten the domestic export frontier, at a time when the won-dollar exchange rate, consumer prices, and the price of oil have all been stable. Song Jae-hak, a researcher at Woori Investment & Securities, said, "Industries like automobiles, IT, shipping, and steel will like to be hit by the strong won." Jang Seok-in, a senior researcher of the Korea Institute for Industrial Economics and Trade (KIET), said, "With the world moving to import parts made in Japan, the foundation of [South Korea’s] machine parts industry, which has managed to survive, will become weak again." On the other hand, some sources said that the effect of a weak yen against the won would be negligable overall. Daewoo’s Go predicted, "The car industry may be hit hard in overseas markets, but as more companies produce automobiles locally, the declining rate will be offset to a degree. The shipping industry will not likely suffer declining profitability due to a technological gap with Japan," added Go. Jang of the KIET was also optimistic, saying, "Some IT industries which highly depend on Japan may benefit from a strong won."
