SEOUL, Jan. 24 (Yonhap) -- South Korean exporters already facing the economic slowdown are striving to overcome one of their thorny issues -- a weakening Japanese currency, which erodes their competitiveness in overseas markets and leads to a drop in profitability, industry sources said Thursday.
The Korean won gained 19.6 percent against the Japanese yen last year, and the local currency also rose 3.52 percent against the yen this year, putting South Korean exporters at the risk of losing ground.
The recent sharp and speedy descent of the yen to major currencies was sparked by Japanese Prime Minister Shinzo Abe, who is pushing to lower the value of the yen - despite international outcry -- thus making the country's products relatively cheaper in overseas markets.
Analysts said South Korean exporters will be hit the hardest among others as South Korean products are directly competing with Japanese goods, as their key export items overlap.
In particular, automakers, electronics firms and airliners will be hurt most, according to analysts.
Hyundai Economic Research Institute, a local think tank, estimated that South Korea will witness a drop in auto and IT exports by 0.87 percent and 0.68 percent, respectively, when the yen falls by 1 percent against the won.
Further, other sectors such as steel and machinery are expected to suffer a drop in exports due to the strong won against the yen, the institute said.
"We are expecting the weakening yen to continue down the road," said an official at Hyundai Motor Co. "We are striving to further boost our competitiveness and diversifying settlement currencies as well."
Earlier in the day, Hyundai Motor reported a net profit of 1.89 trillion won (US$1.8 billion) in the fourth quarter, down from the 2 trillion won a year earlier as the stronger won traded off its brisk sales.
Airliners are also one of the sectors hit hard by the weakening yen. The number of Japanese tourists coming to South Korea dropped 20 percent this month from a year earlier. Korean Air Lines Co., the country's leading air carrier, said the number of Japanese passengers using its flights sank around 20 percent this month.
Analysts said smaller exporters may be hurt as they are exposed to greater currency risks compared with bigger rivals.
"We, smaller exporters, could not cope with the current situations," said an official at the Korea Federation of Small and Medium Business. "The government should take actions to ease currency volatility."
In the face of the strong won and the global economic slump, South Korean exports, which account for more than half of the country's economic expansion, are feared to falter down the road.
South Korea's economy expanded 1.5 percent from a year earlier in the fourth quarter of last year, unchanged from the on-year expansion in the third quarter, the Bank of Korea said earlier in the day. From a quarter ago, Asia's fourth-largest economy grew 0.4 percent.
Bahk Jae-wan, South Korea's chief economic policymaker, said Wednesday that his country may take steps to curb the won's volatility, thus helping exporters tide over the strengthening won.
"The descent of the Japanese yen slowed down, and we are cautiously expecting the yen not to drop sharply in the future," said Cho Young-tae, an official at the Ministry of Knowledge Economy.
"Currently, exporters are facing difficulties in overseas markets (due to the weaker won), and the government will make efforts to minimize damages on them."
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