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The Bank of Korea announced on the 24th that the balance of foreign currency deposits by foreign exchange bank residents stood at $99.83 billion as of the end of June this year, an increase of $3.04 billion from the end of the previous month. Of this, yen-denominated deposits increased by $1.23 billion, the largest monthly increase ever. The Chosun Ilbo, a South Korean newspaper, explained, "The reason why yen-denominated deposits showed the highest growth in history was that the yen hit the lowest level in eight years, and many people expected that the yen would appreciate in the future."
On June 19th, the Korean foreign exchange market temporarily hit 100 yen = 897 won. It was the first time in about eight years since June 2015 that the 800-won mark was added.
Under these circumstances, the JoongAng Ilbo, a South Korean newspaper, said, "Due to the depreciation of the yen and the endemic from the COVID-19 disaster, the number of Korean tourists traveling to Japan exceeded 3 million in the first half of this year, and the number of Japanese who visited South Korea decreased to 3 million. It turns out that it has more than doubled."
According to the Korea Tourism Organization and the Japan Tourism Agency, 3.129 million South Koreans visited Japan in the first half of this year, 3.6 times the number of Japanese who visited South Korea (862,000). The number of Korean visitors to Japan has recovered to 81% compared to the first half of 2019 (3,863,000) during the coronavirus pandemic. Meanwhile, the number of Japanese visitors to South Korea (862,000) was only 52.1% compared to the first half of 2019 (1,654,000). Yonhap News reports that the record-breaking depreciation of the yen is behind the large number of foreign tourists, including Koreans, visiting Japan.
However, a weaker yen is not only good for South Korea. The Hankyoreh, a South Korean newspaper, published an article commenting on the effects of the depreciation of the yen on the South Korean economy, written by Jung Nam-goo, an editorial writer in charge of the economy of the newspaper. "Japan has negative interest rates, while the U.S. continues to raise interest rates," Chong said. "The depreciation of the yen will progress a little further, but it seems that we are entering the final stage."
A weaker yen is not good for South Korean companies because a weaker yen makes it easier for Japanese companies competing with South Korea to export their products. In addition, it has been pointed out that South Korea's current account balance may deteriorate due to an increase in the number of Korean tourists visiting Japan due to the yen's depreciation.
Responding to such concerns, Chung said, "According to a report released by the Korea International Trade Association in May last year, the 'export competitiveness' between South Korea and Japan (an index showing the degree of similarity in the export structures of the two countries and their competitive relationship) was 2015. It continues to decline, from 0.487 in 2019 to 0.458 in 2021." "This means that Korean and Japanese products will no longer be as competitive in the global market as they used to be," he said. "Of course, there are markets where South Korean and Japanese companies are in fierce competition, such as the U.S. automobile market. It's not enough to have a major negative impact on exports and the economy in general," he concluded, adding, "Actually, there's nothing we can do about it. We have no choice but to accept it."
On the other hand, in contrast to Chung, who expressed the view that the yen's depreciation is in its final stage, former finance minister Eisuke Sakakibara, known as 'Mr 1 yen', recently predicted further yen depreciation in an interview with the media, saying that the yen could exceed 160 yen against the dollar next year from the current 140 yen per dollar.
In the Seoul foreign exchange market on the 31st of last month, the won exchange rate against the yen was 899.53 won against 100 yen.
2023/08/07 13:23 KST
