Strong Won Hurting Exports to Japan

luvsmiling, Sept. 24, 2014, 9:34 a.m.

The strong Korean won has emerged as a major threat to local exporters, especially those in the auto industry, who are fiercely competing with their Japanese rivals. Hyundai, Korea's top automaker, saw its operating profits plunge by 13 percent and its affiliate Kia's by 32 percent in the second quarter of this year, while Japanese automakers all reported increased profits. 

Policymakers here are concerned that the Japanese currency could weaken further after depreciating for the past year and a half.  It also seems very unlikely that the central bank will lower its key rate to deal with the weakening yen as the governor has made it clear that the won-yen exchange rate cannot be the sole factor for setting the nation's interest rate.

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